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Credit and Credit Reports
Presented by Nancy Adelson
Senior Loan Originator, Spectrum Mortgage
NSCC Real Estate Program Coordinator
For NSCC Investment Club
February 1, 2011
Benefits of Credit
Convenient Buy homes, cars, major purchases Start and/or expand business Display good credit history Increase future borrowing power
Disadvantage of Credit
Buy more than able to afford or pay back Incur costly finance charges or higher rates Debtor’s security/collateral may be
repossessed Creditor may use legal action to collect Generate poor credit history Closes door to future borrowing
Key Words Defined
Credit: The right to pay later for products and services purchased today
Finance Charge: The extra cost for credit Creditor: The party who sells the goods or services
on credit or lends money Debtor: The party who buys the goods or services on
credit or borrows money Secured/Installment Loan: Creditors own rights to
debtor’s asset (collateral) if debtor doesn’t pay Unsecured/Revolving Loan: No collateral provided
Key Words Defined Continued Delinquent Payment: Payment received by
creditor 30 days or more past due date Credit Reporting Agency/Bureau (CRA):
Repository of credit information collected from credit grantors
Credit Report: Provided by credit bureaus containing detailed information on credit history
Credit Worthy: The likelihood of repaying loan & making payments on time
Credit Score: Based on credit history providing a measure of credit worthiness
FICO Scoring
Credit scoring system developed by the Fair Isaac Company
Used by 90% of US lenders & creditors FICO score range is 350 to 850 Consumers who are good credit risks have
higher credit scores 1:1,300 US citizens have credit scores
above 800
Five Factors of FICO Scoring Payment History: Paying debts in full and on
time Outstanding Credit Card Balances: Marks ratio
between outstanding balance & available credit Credit History: Length of time since opened
accounts Type of Credit: Mix of installment and
revolving accounts Inquiries: Credit inquiries within 12 months
Fair Credit Reporting Act of 1970
Governs the collection, dissemination, and use of consumer credit information
Protects consumers from fraudulent and inaccurate credit reporting agency reports
Requires Credit Reporting Agencies (CRA) to remove past credit items in a reasonable time
Offers more protection for the privacy of consumers
Fair and Accurate Credit Transaction Act of 2003
Amended Fair Credit Reporting Act Allows consumers to obtain one free credit report
every 12 months from each CRA Central web site for free annual credit reports:
www.annualcreditreport.com Reduces identity theft by permitting the people to
place alerts on their credit histories if identity theft is suspected
Requires secure disposal of consumer information
Credit Reports Produced by Credit Reporting Agencies
(CRA) (aka Credit Bureaus) Shows individual’s credit history, personal
information, employment, residence, credit inquiries and legal actions (liens, collections, bankruptcies, garnishments, judgments, etc.)
Rates credit risk and payment history Information provided by creditors and public
records Time limits on your record: inquiries, 2 years; late
payments, foreclosure, collection accounts & Chapter 13 bankruptcy, 7 years; Chapter 7 bankruptcy, 10 years; unpaid liens, forever.
Improve Your Credit Score Time heals bad credit Pay on time and payoff revolving debts Negotiate and pay off collections, judgments
and liens Keep and use “old” revolving accounts Use 5 trade-lines
– 3 revolving & 2 installment Regularly review and fix your credit reports
from each Credit Reporting Agency (CRA) Don’t allow creditor inquiries
Free Credit Reports
Call 1-877-322-8228 Complete the Annual Credit Report Form &
mail Annual Credit Report Request Service, PO Box 105281, Atlanta, GA 30348-5281
Go to https://www.annualcreditreport.com/cra/index.jsp
First Steps to Repairing Your Credit
Remember car dealers, landlords, creditors, lenders, insurers etc. check your credit reports
To ensure proper correction, first contact the creditors and get documentation/proof
Then contact all CRA’s with request and documentation
Credit Reporting Agencies Contact Information
Repair Your CreditCharge $15-$17 for each FICO Score
Equifax -- 1-800-685-1111http://www.equifax.com
Experian -- 1-888-397-3742http://www.experian.com
TransUnion -- 1-800-916-8800http://www.transunion.com
Repair Your Credit Online
Repair Your Credit by LetterExperian Trans Union Corp. Equifax
Attn: NCAC Attn: Disputes Attn: Disputes
P.O. Box 2002 P. O. Box 1000 P. O. Box 740241
Allen, Texas 75013 Chester, PA 19022 Atlanta, GA 30374
I dispute the accuracy of my credit file as revealed to me on [Give Date].
In accordance with Section 611 of the Fair Credit Reporting Act, I hereby request that you investigate the current status of the information I have disputed below.
Credit Grantor:________ Account No.:_________The disputed portion reads: _____I maintain that:_____
Your Name and Your Address
Your Social Security NumberYour Signature and Date
Read More and Learn More
http://www.mtgprofessor.com/credit_issues.htm
Conclusion
Use credit wisely and reap the benefits Know your rights as consumers Be aware of finance charges and fine print
in contracts
