 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
       IntroductionCredit Score BasicsCredit Scores - AdvancedRe-ScoringObtaining Your Credit ReportReading Your Credit ReportDisputing ErrorsIdentity Theft BasicsMaking & Mixing Credit ReportsReinvestigations (or not)HistoryCredit RepairDebt CollectionAuto InsuranceHomeowners InsuranceMortgage InsuranceThe Color of Credit ScoresSpecial ChallengesOpting OutImpermissable AccessDamage & DamagesThe 2003 FACTA BattleMissing Credit LimitsConclusion |
|
Credit Scores and Credit Reports, by Evan HendricksChapter 5 Reading Your Credit Report:
In a sense a person is defined by the checks he writes.
Years ago, a major complaint about credit reports was that they were hard to read and hard to understand. In recent, years Equifax, Experian, and Trans Union, the Big Three consumer reporting agencies (CRAs), have changed the format of the reports to make them more readable and understandable. Still, significant numbers of consumers say they have trouble understanding all or part of their credit report. This brief chapter will go over the basics of what is in a credit report and what to look for. You will want to note that each of the CRA's reports include at the top a "confirmation number," (Equifax), or "report number" (Experian) or "File Number" (Trans Union). If you find errors in your report and dispute them, you will want to refer to this number when communicating with each CRA.65By examining them the agents get to know his doctors, lawyers, creditors, political allies, social connections, religious affiliation, educational interests, the papers and magazines he reads and so on ad infinitum. These are all tied to one's Social Security number... - Justice William O. Douglas (Dissenting) California Bankers Assoc. v. Shultz (416 U.S. 735, 1974.) 65 This number is not available on the reports pulled by merchants. To complicate matters further, "credit report" is not the official term. Under the Fair Credit Reporting Act, it's called a "consumer report." The industry refers to the version they provide you as a "consumer disclosure." The industry refers to the report they sell to creditors as a "credit report" or "subscriber version." For purposes of readability and common understanding, we will continue to refer to it as a "credit report." The Credit Report consists of three (or four) basic sections:
Each of the Big Three CRAs uses a slightly different format. On the first page, Experian lists a helpful summary, of "Potentially negative items," including "public records," "accounts with creditors and others," and the number of "Accounts in good standing." Experian does not list the identifying data until the final page. Yet on that page, it usually provides a list of the variations as to how your name is reported, i.e. with middle initial or without, or with a "Jr." designation. It also includes the spouse's name when it has one. Experian then leads with public records, collections, and accounts that are negative because of late payments. By contrast, the Trans Union report lists the SSN, date of birth, and phone number in the upper right-hand corner, and also posts the date since information about you has been in TU's files. On the upper left-hand side, it lists name, address, former addresses, employment information, and the date it was reported. Like Experian and Equifax, the TU report opens with the most negative items, public records, followed by collections and accounts that are negative because of late payments. In some ways the Equifax report is the hardest to read because of its "line-and-box" format for listing accounts. On the other hand, the Equifax report more fully explains the categories and other factors that determine your credit worthiness. More on this later. What's In A Name? (The Credit Header) It's important to make sure that your identifying information is accurate. The CRAs use identifying information to determine to which report credit information is routed. As we will see later, misapplication of identifying information can result in mixed files and other inaccuracies. This is particularly true of the SSN. If the SSN listed in the "credit header" of your credit report isn't yours, you will want to put this on the top of your dispute list and make a copy of your Social Security card so it can be attached. If you're a "Sr." or a "Jr.," or you have a name very similar to a family member, particularly one who lives at the same address, you want to make sure that your relative's information is not being mixed on to your file. Caution: if your report lists current or previous addresses that you've never heard of, that's another possible indicator that your file might be mixed with someone else's. The CRAs often refer to identifying information as "indicative data." Your Credit History Bankruptcies can remain on your report for 10 years; other negative data can remain for seven years. Unpaid tax liens can stay on forever; once paid, they must come off in seven years. The credit report typically lists the worst items first, more or less in this order:
Equifax reports it as "pays as agreed;" Experian and Trans Union report "never late." Clearly, you will want to check to ensure accuracy. As we saw in earlier chapters, recent public records can be extremely damaging to your credit score, as can recent collections, charge-offs, and major delinquencies. After discussing inquiries, we will use the Equifax format to explain the credit history in more detail. Inquiries The "Inquiries" section shows which companies have accessed your report. Basically, there are two types of legitimate inquiries: "soft" and "hard." The more common "soft" inquiry is not supposed to affect your credit score. These include promotions (PRM) by creditors that sent you a "pre-approved" credit card application or other credit offer. You can stop these offers by calling 1 888 OPTOUT (see Chapter 17 for more details). They also include "account reviews" (AR) by credit-ors with whom you already have accounts. Creditors often conduct an automated scan of their customers' credit reports to see if there is any deterioration in payment performance. Some credit card issuers have been known to raise interest rates after account reviews showed a consumer's credit rating was falling, even though the consumer never had a late payment with that particular company. There have been instances when even though a consumer closes an account, the creditor continues to pull that consumer's report to do account reviews. One court has ruled that conducting account reviews on non-customers is a violation of the FCRA. Account History Status Codes The Equifax report lists the codes showing how consumers are classified when they don't pay their bills on time. Along with these numeric codes, a credit report can have a letter showing the type of credit, i.e., "R" for revolving (credit card) and "I" for installment (personal loan). The code for someone who always paid her credit card on time would be "R1." Here are the numeric codes.
Description of Accounts The Equifax report, through its "Account Column Title Description," lists many of the categories of informa-tion considered by creditors and FICO when judging your credit worthiness. On a typical credit report, many of the "boxes" under these Account Columns will be blank because there was no "Balloon Payment Date" or a "Charged Off Amount." Remember, in addition to the negative data about late payments or non-payments, there are several key factors affecting your credit report. One such factor is the difference between the balance, which is the amount owed, and the credit limit. The closer you are to being "maxed out" on your credit card, the worse it is for your credit score. Moreover, some credit card companies report to the credit bureaus on the last day of the month. Thus, that's the balance owed that gets reported. That means that paying off credit card balances by the due date in the middle of the month does not improve your credit score as much as most people think. In fact, if the end-of-the-month balance is very high, this factor is likely to lower your credit score. Here are the Account Column Title Descriptions As listed on the Equifax report:
The second factor is the "Type of Account," (i.e., "revolving" for credit card vs. "installment," for personal loans, vs. mortgages). Equifax seems to describe mortgage loans as "installments," and then in an "Additional Information" line, state "Real Estate Conventional Mortgage." The third factor is "Whose Account," which refers to the "ECOA code,"66 meaning, are only you — the individual — responsible? Or is it a "joint account" with your spouse? Or is your spouse an "authorized user?" The "Authorized User" is sometimes problematic. When a spouse is an authorized user, he or she is authorized to use the card, but is not always responsible for paying. Nonetheless, FICO still scores authorized user accounts. This means that if you are the authorized user on an account that is always paid on time, you benefit. If payments are regularly late, however, you are penalized for an account that you are not responsible for paying. It's worse when there is a divorce, and you are still tagged as an authorized user on an ex-spouse's account that is unpaid and sent to collection. Creditors have been known to send debt collectors after the non-responsible authorized user, and to unfairly report the unpaid debt to the user's credit report as a means of pressuring that consumer into paying the ex-spouse's debt. Secret Data? Of course, you can't read what you can't see. As noted in Chapter 2, Sources have told this author there is raw data in credit reports - regularly scored by FICO scoring models - that are never seen by consumers because these data do not appear on their credit reports. These raw data show up on "machine readable" credit reports used by lenders and their scoring models, but not on the more familiar reports disclosed to consumers. For example, one major credit bureau has one code to denote the most recent negative item; a second code marking the previous most recent negative item, and a third code denoting the most recent, worst negative that is more than 24 months old. If consumers are to become more educated about their credit reports and credit scores, shouldn't this kind of information be disclosed as well? 66 Equal Credit Opportunity Act code Conclusion Getting your credit report is fairly easy when the system works as it should. Reading your report is not too difficult if you know what to look for. Disputing errors and getting them corrected should not be that difficult, and sometimes it isn't. Unfortunately, sometimes it is. © 2005 Evan Hendricks and Privacy Times, Inc. All rights reserved. |
|
 |
       |
 |
 |
 |