Information

Your credit score is what banks and other financial institutions use to help them determine how likely you are to pay back the money you borrowed. There are different scores from different reporting agencies, the main ones BEACON, EMPIRICA, and FICO base their scores solely on the information the credit reporting agencies give them. Other lenders create their own scores using different mathematical equations based on your credit application and your credit report.

Your credit score evaluates five main categories of information in your credit report, and compares this information to the patterns in hundreds of thousands of past credit reports. These five categories are, in order of importance:

A. Payment history - This consists of 35% of the score.

This is about any delinquencies: How severe, how many, and how recently. The largest single indicator.

B. Amounts owed - The second largest indicator at 30% of the score

Do you have large outstanding balances? What is your ratio of debt to credit limits?

C. Length of credit history - How established your credit is, 15% of the score.

How old is your oldest account and/or the average age of your accounts.

D. New credit - Are you attempting to take on new debt? This is only 10% of the score.

This is where signing up for a credit card in order to get free stuff can hurt you. The number of new inquiries and new account openings is reviewed.

E. Types of credit - Is it a healthy mix? 10% of the score

Having a mix of credit types on your credit report - credit cards, installment loans (such as a mortgage or auto loans), and personal lines of credit - is normal for people with longer credit histories and can add slightly to their scores

A good score ranges from 650 to 800. Like we said before, if your score is below 680 it is very important that you repair your credit immediately.

There are laws in place to protect the consumer from inaccurate and unverifiable credit reporting!

The U.S. Public Interest Research Group (PIRG) makes sure that these laws are being followed. Our first step is to audit the credit bureaus or creditors using The Fair Debt Collection Practices Act and The Fair Credit Reporting Act. These two laws have been established to protect consumers like you. Creditors and credit bureaus are legally obligated to produce documented evidence within a reasonable amount of time (generally 30 days) to back the claims they make about you. If investigation proves that they cannot validate their claims they must promptly remove any undocumented information from your credit report.

A study by the U.S. Public Interest Research Group found that 70% of all credit reports contained errors. These black marks in your credit history can have devastating consequences:

The most valuable thing we have is our good name. As consumers the most common reflection of our reputation as someone who pays bills on time, who is trustworthy and financially sound is our credit report. Unfortunately the information contained in our credit reports, which are bought and sold daily to nearly anyone who requests and pays for them, does not always tell a true story.

Credit bureaus collect and compile information about consumer creditworthiness from banks and other creditors and from public record sources such as lawsuits, tax liens and legal judgments. The three major credit bureaus -- Experian (formerly TRW), Equifax, and Trans Union -- maintain files on nearly 90% of all American adults. Those files are routinely sold to credit grantors, landlords, employers, insurance companies, and many others interested in the credit record of a consumer, often (legally) without the consumer's knowledge or permission. Conversely, consumers rarely check their credit record until after they've been denied or otherwise encountered a problem. Throughout the 1990s, credit report errors have been a serious problem that several states and Congress have addressed.

This is the PIRG's sixth study on credit report accuracy and privacy issues since 1991. The PIRG has also participated in state and federal legislative battles to improve credit reporting laws. This report is the first investigation of credit report accuracy since the 1996 Congressional changes to the federal Fair Credit Reporting Act (FCRA). Designed to improve the accuracy and ease of access to reports, these changes took effect in September 1997. The findings of mistakes that happen are troubling. An alarming number of credit reports contain serious errors that could cause the denial of credit, a loan, or even a job in some states. Further, some consumers never even received their reports, even after repeated calls.

Among the major credit report accuracy findings of the survey:

• Twenty-nine percent (29%) of the credit reports contained serious errors - false delinquencies or accounts that did not belong to the consumer - that could result in the denial of credit;
• Forty-one percent (41%) of the credit reports contained personal demographic identifying information that was misspelled, long-outdated, belonged to a stranger, or was otherwise incorrect;
• Twenty percent (20%) of the credit reports were missing major credit, loan, mortgage, or other consumer accounts that demonstrate the creditworthiness of the consumer;
• Twenty-six percent (26%) of the credit reports contained credit accounts that had been closed by the consumer but incorrectly remained listed as open;
• Altogether, 70% of the credit reports contained either serious errors or other mistakes of some kind

Among the survey's major access to credit report findings:

• Of the consumers that did obtain their credit reports, at least 14% of them were forced to call back 3 or more times after receiving busy signals or had to write a letter in order to receive their report;
• And 12% of the consumers waited two weeks or longer to receive their report once they finished requesting it. It took more than a month for one California man to receive his report.
• Overall, 15% of consumers who attempted to participate in the survey either made at least 3 phone calls and never got through or requested their reports but never received them.

Fair Credit Reporting Act

The federal Fair Credit Reporting Act (FCRA) promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies. There are many types of consumer reporting agencies. The main ones include credit bureaus and specialty agencies (such as agencies that sell information about check writing histories, medical records, and rental history records). Here is a summary of your major rights under the FCRA.

1. You must be told if information in your file has been used against you.

Anyone who uses a credit report or another type of consumer report to deny your application for credit, insurance, or employment - or to take another adverse action against you - must tell you, and must give you the name, address, and phone number of the agency that provided the information.

2. You have the right to know what is in your file.

You may request and obtain all the information about you in the files of a consumer reporting agency (your "file disclosure"). You will be required to provide proper identification, which may include your Social Security number. In many cases, the disclosure will be free.

3. You are entitled to a free file disclosure if:

• a person has taken adverse action against you because of information in your credit report;
• you are the victim of identity theft and place a fraud alert in your file;
• your file contains inaccurate information as a result of fraud;
• you are on public assistance;
• you are unemployed but expect to apply for employment within 60 days.

In addition, as of September 2005 all consumers will be entitled to one free disclosure every 12 months upon request from each nationwide credit bureau and from nationwide specialty consumer reporting agencies.

4. You have the right to ask for a credit score.

Credit scores are numerical summaries of your credit-worthiness based on information from credit bureaus. You may request a credit score from consumer reporting agencies that create scores or distribute scores used in residential real property loans, but you will have to pay for it. In some mortgage transactions, you will receive credit score information for free from the mortgage lender.

5. You have the right to dispute incomplete or inaccurate information.

If you identify information in your file that is incomplete or inaccurate, and report it to the consumer reporting agency, the agency must investigate unless your dispute is frivolous.

6. Consumer reporting agencies must correct or delete inaccurate, incomplete, or unverifiable information.

Inaccurate, incomplete or unverifiable information must be removed or corrected, usually within 30 days. However, a consumer reporting agency may continue to report information it has verified as accurate.

7. Consumer reporting agencies may not report outdated negative information.

In most cases, a consumer reporting agency may not report negative information that is more than seven years old, or bankruptcies that are more than 10 years old.

8. Access to your file is limited.

A consumer reporting agency may provide information about you only to people with a valid need -- usually to consider an application with a creditor, insurer, employer, landlord, or other business. The FCRA specifies those with a valid need for access.

9. You must give your consent for reports to be provided to employers.

A consumer reporting agency may not give out information about you to your employer, or a potential employer, without your written consent given to the employer. Written consent generally is not required in the trucking industry.

10. You may limit "prescreened" offers of credit and insurance you get based on information in your credit report.

Unsolicited "prescreened" offers for credit and insurance must include a toll-free phone number you can call if you choose to remove your name and address from the lists these offers are based on.

11. You may seek damages from violators.

If a consumer reporting agency, or, in some cases, a user of consumer reports or a furnisher of information to a consumer reporting agency violates the FCRA, you may be able to sue in state or federal court.