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Credit and Credit Reports

Credit and Credit Reports

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Credit and Credit Reports

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  1. 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

  2. Benefits of Credit • Convenient • Buy homes, cars, major purchases • Start and/or expand business • Display good credit history • Increase future borrowing power

  3. 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

  4. 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

  5. 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

  6. 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

  7. 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

  8. 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

  9. 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: • 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

  10. 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.

  11. 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

  12. 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

  13. 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

  14. Credit Reporting Agencies Contact InformationRepair Your CreditCharge $15-$17 for each FICO Score • Equifax -- 1-800-685-1111 • Experian -- 1-888-397-3742 • TransUnion -- 1-800-916-8800

  15. Repair Your Credit Online

  16. Repair Your Credit by Letter 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 AddressYour Social Security NumberYour Signature and Date

  17. Read More and Learn More

  18. Conclusion • Use credit wisely and reap the benefits • Know your rights as consumers • Be aware of finance charges and fine print in contracts

  19. Questions? Nancy Adelson