1. Why Should I Care About Good Credit?

• Good credit is important, because creditors will charge a higher interest rate, a higher monthly payment, and require a larger down payment if you don’t have a good credit score.  In other words, having good credit costs less, and you can have better buying choices!

2. What is a Credit Report?

• A credit report is a record of your credit, payments and debt.  There are three separate credit bureaus, Equifax, Experian, and TransUnion.  They are large databases that are run by private industry – basically they are very large computers.  Creditors subscribe to each bureau for a fee for the purpose of sharing information about your debts.

3. Why Should Anyone Be Able to See My Personal Business?

• If you were going to loan someone money, what would you need to know about them? You would need their name and address, so you could send a bill?  Wouldn’t you want to know that they are who they say they are?  Wouldn’t you like to know how much they already owe to others, and whether they tend to pay their bills on time?  These are the kinds of things that are tracked in your credit history.

4. Who Oversees the Credit Bureaus?

• Though the credit bureaus are not federal agencies, the Fair and Accurate Credit Transactions Act of 2003 govern them by the Fair Credit Reporting Act and. Under these acts, you are entitled to see your own history, your credit score, to “opt out” of marketing, and to dispute any errors. Your privacy is protected carefully, but identity theft is the fastest growing crime in America. 

5. Who Can See Your Credit File?

• Marketing firms can purchase your name and address in order to send you offers via mail, but they do not see your full credit history until you give them permission.  If you have open credit, that creditor can review a copy of your credit file once per year.  Employers can ask to see your credit file, but they need to have your permission.  You can obtain a copy of your credit file yourself.  None of the above counts against you at all, but the fact that your credit has been reviewed is noted under the “Inquiries” section of your report and stays there for 2 years.   

• If you apply for credit, that creditor must have your permission to review your file before completing you application. This kind of inquiry stays in your credit file for 3 years.

6. What Is a Credit Score?

• A credit score is a three-digit code that is the result of an elaborate computer formula.  About 200 different factors are considered.  Your creditworthiness is compared with almost 200 million consumers.  However, your credit score does not consider any personal factors, like why you might have had problems in paying your bills.  It is a good idea to write a “cover letter” to include with your credit application explaining your difficulties during the time frame that any damage occurred. 

• You may also send a 100-word statement to each credit bureau to be included in your credit file.  The statement should say why you had problems, (like accident, health, divorce, unemployment, etc), how you dealt with the problem (contacted creditors or sought professional credit counseling) and say that your situation is now stable.

7. What Is a “Good” Credit Score?

• 750 or over, you are “Super-prime”!  You will get the best offers!

• 720 or over, you will get very competitive offers

• 707 – 720, you may have had some damage in the past, like missing a payment

• 680  - 720 you will not get the best interest rates – rebuild your credit, and reapply 

• Below 680 - Be careful!  You are classified as, "sub-prime", and may be targeted by predatory lenders!

8. What Are the Positive Factors That Improve Your Score?

• A good record of paying on time

• Keeping the amount of debt low

• Having some accounts that have been open for a long time

• Making sure that you do not apply for credit too often

• Being careful about not having too much credit card debt

9. What Are the Negative Factors That Lower Your Score?

• Paying your bills late

• Having too much debt

• Credit is very new

• Applying for new credit more than 5 times in 5 months, or 11 times in 12 months

• Carrying high credit card balances

10. How Long Does Information Stay On My Credit Report?

• Credit information is tracked for 7 years, and Chapter 13 Bankruptcy for 10 years.  Inquiries where you apply for credit (“hard inquiries”) stay on file for 3 years, and credit file reviews made by employers, by existing creditors (AR or AM) or promotional reviews of you demographical information by marketing firms (PRM) all stay for 2 years (these do not count against you, but are noted because you have the right to see who has obtained any information from your credit file).

11. So, if adverse Information Stays On My File for 7 years, why should I Pay My Debts?

• Because when you catch up your payments and re-establish a good track record, your credit score starts to rise.  It could go up as much as 20 points over a three-month period.  That much of an increase could result in obtaining much better credit rates, and you could wind up saving a lot of money.  Also, if you have accounts with collection agencies or attorneys, high fees can be added to the balance if you fail to pay in a timely m anner.

12. What Are the Proportions?

• 35% - Your record of payments – did you pay all of your bills on time?

• 30% - Debt ratios – debt/income and balance/credit line

• 15% - Duration – how long your accounts have been open

• 10% - Inquiries – how often have you applied for credit recently

• 10% - Diversity – how is your debt distributed – mortgage/rent, auto loan, credit cards, etc.

13. What Are Some Reasons for Being Refused Credit?

• Debts are too new

• Balances are too high

• Missed Payments

• Not employed long enough

• Income is too low

• Too many inquiries

• Too many credit card accounts

14. How Do I Order a Free Copy of My Credit File?

• As of Sept. 1, 2005, anyone obtain one free copy of their credit report free (Mayland resident can have a free one now) from each credit bureau.  You can write to the addresses below, and you must include a picture ID that shows your social security number.  You must supply your full name, address and birth date.  The addresses of the three credit bureaus are:

• Equifax, PO Box 105873, Atlanta, GA 30374

• Experian, PO Box 2104, Allen, TX 75013

• TransUnion, PO Box 2000, Chester, PA 19022 

  However, this version does not show your credit score! If you want the version that includes your score, you must pay for it.   You can order reports online at  Equifax, Experian, TransUnion, or MyFico.

15. I Received My Credit File and There Are Some Errors!  What Should I Do?

• You can dispute any information that shows in your credit file by contacting the credit bureau.  The credit bureau is then obligated under the Fair Credit Reporting Act to contact the reporting creditor.  Either that creditor must prove to the credit bureau that the information supplied is accurate, or the information must be removed from your credit file.  A corrected copy of your file and a letter outlining the results of the research will be sent to you. This process is free! Professional credit counseling firms, such as Consumer Credit Counseling Service of Greater Washington (800)747-4222 can assist you with this process.

16. How Can I Stop the “Junk Mail?

• call  1-888-5OPTOUT

• or by internet at www.ftc.gov

• or by writing to:

• Direct Marketing Association

• PO Box 9008 Farmingdale, NY 11735

17. How Can I Repair My Credit?

• The process of cleaning up your credit is either free, or it can’t be done legally. Here is what to do, and it is free and easy, but the help of a credit counseling firm like Consumer Credit Counseling of Greater Washington is sometimes helpful.

• First of all, obtain a copy of your credit history and check for errors

• Next dispute any errors by contacting the credit bureaus

•   Get current with all open accounts Pay off any accounts that have been charged off or referred to collection agencies or attorneys

• Pay all of your bills on time for 6-12 months, and your score will automatically increase

• Pay down your balances

• Stay on the job for at least 6 months

• Remain living at the same address for at least 6 months

18. What Is Identity Theft?

• Identity theft is the fastest growing crime in America.  It is fraudulently using your name, address, and social security number to apply for credit or stealing your account numbers online, using discarded bills or by stealing your wallet.

19. How Can I Protect Myself From Identity Theft?

• You should check your credit file at least every six months.  

• Any change to your credit file that you don’t recognize could be either an error or an incidence of identity theft.  

• Carry only essential identification and cards with you, sign all credit cards immediately

• Do not purchase online from any source that is not encrypted with security

• Shred all old bills before discarding

• Keep your eye on the cashier

• Memorize your passwords

• Watch for any new cards that you have applied for

• Do not leave mail uncollected in your absence

• Do not carry your social security card with you.

20. Who should I contact if my identity is stolen?

• Federal Trade Commission (FTC) 877-438-4338

• U. S. Postal Inspection Service 800-275-8777

• Social Security Administration 800-772-1213

• Check Rite 800-766-2748

• Chex Systems 800-328-5121

• NPC 800-526-5380

• Tele-Check 800-336-2425

• Equifax Consumer Fraud Division 888-766-0008

• Experian's National Consumer Assistance 888-397-3742

• TransUnion Fraud Victim Assistance Dept. 800-680-7289