What is a Credit Reporting Agency?

A credit reporting agency (CRA) is a company that collects information from various sources and provides consumer credit information on individual consumers for a variety of uses. This helps lenders assess credit worthiness, the ability to pay back a loan, and can affect the interest rate and other terms of a loan.

Credit reporting agencies maintain files on borrowers. Lenders making credit decisions buy credit reports on their applicants and customers from the credit reporting agencies.

Your report details your credit history as it has been reported to the credit reporting agency by lenders who have extended credit to you. Your credit report lists what types of credit your use, the length of time your accounts have been open, and whether you’ve paid your bills on time. It tells lenders how much credit you’ve used and whether you’re seeking new sources of credit. It gives lenders a broader view of your credit history than do other data sources, such as a bank’s own customer data.

Who are the major credit reporting agencies?

Most US consumer credit information is collected by 3 major credit bureaus (CRA’s): Equifax, Experian (formerly known as TRW), and TransUnion. These organizations are for-profit businesses and possess no government affiliation. Here is the contact information for the 3 major CRA’s:

Equifax

P.O. Box 740241, Atlanta, GA 30374; (800) 525-6285; www.equifax.com

Experian

P.O. Box 2104, Allen, TX 75013; (888) 397-3742; www.experian.com

TransUnion

P.O. Box 2000, Chester, PA 19022; (800) 680-7289; www.transunion.com

What do I do if I am a victim of identity theft?

Is the question a girl asked me in my office today. So I decided this would be as good a time as ever to blog about identity theft, and maybe kill two birds with one stone.

Identity theft is a serious crime. It occurs when your personal information is stolen and used without your knowledge to commit fraud or other crimes.

The Federal Trade Commission (FTC) has set up an excellent website that will give you all the information you would ever want on the subject (http://www.ftc.gov/bcp/edu/microsites/idtheft/).

Here is what the FTC says about identity theft:

Identity theft occurs when someone uses your personally identifying information, like your name, Social Security number, or credit card number, without your permission, to commit fraud or other crimes.

The FTC estimates that as many as 9 million Americans have their identities stolen each year. In fact, you or someone you know may have experienced some form of identity theft.  The crime takes many forms. Identity thieves may rent an apartment, obtain a credit card, or establish a telephone account in your name. You may not find out about the theft until you review your credit report or a credit card statement and notice charges you didn’t make-or until you’re contacted by a debt collector.

Identity theft is serious. While some identity theft victims can resolve their problems quickly, others spend hundreds of dollars and many days repairing damage to their good name and credit record.  Some consumers victimized by identity theft may lose out on job opportunities, or be denied loans for education, housing or cars because of negative information on their credit reports. In rare cases, they may even be arrested for crimes they did not commit.

How do thieves steal an identity?

Identity theft starts with the misuse of your personally identifying information such as your name and Social Security number, credit card numbers, or other financial account information. For identity thieves, this information is as good as gold.

Skilled identity thieves may use a variety of methods to get hold of your information, including:

1. Dumpster Diving. They rummage through trash looking for bills or other paper with your personal information on it.
2. Skimming. They steal credit/debit card numbers by using a special storage device when processing your card.
3. Phishing. They pretend to be financial institutions or companies and send spam or pop-up messages to get you to reveal your personal information.
4. Changing Your Address. They divert your billing statements to another location by completing a change of address form.
5. Old-Fashioned Stealing. They steal wallets and purses; mail, including bank and credit card statements; pre-approved credit offers; and new checks or tax information. They steal personnel records, or bribe employees who have access.
6. Pretexting.  They use false pretenses to obtain your personal information from financial institutions, telephone companies, and other sources.  For more information about pretexting.

What do thieves do with a stolen identity?

Once they have your personal information, identity thieves use it in a variety of ways.

Credit card fraud:

• They may open new credit card accounts in your name. When they use the cards and don’t pay the bills, the delinquent accounts appear on your credit report.
• They may change the billing address on your credit card so that you no longer receive bills, and then run up charges on your account. Because your bills are now sent to a different address, it may be some time before you realize there’s a problem.

Phone or utilities fraud:

• They may open a new phone or wireless account in your name, or run up charges on your existing account.
• They may use your name to get utility services like electricity, heating, or cable TV.

Bank/finance fraud:

• They may create counterfeit checks using your name or account number.
• They may open a bank account in your name and write bad checks.
• They may clone your ATM or debit card and make electronic withdrawals your name, draining your accounts.
• They may take out a loan in your name.

Government documents fraud:

• They may get a driver’s license or official ID card issued in your name but with their picture.
• They may use your name and Social Security number to get government benefits.
• They may file a fraudulent tax return using your information.

Other fraud:

• They may get a job using your Social Security number.
• They may rent a house or get medical services using your name.
• They may give your personal information to police during an arrest. If they don’t show up for their court date, a warrant for arrest is issued in your name.

How can you find out if your identity was stolen?

The best way to find out is to monitor your accounts and bank statements each month, and check your credit report on a regular basis. If you check your credit report regularly, you may be able to limit the damage caused by identity theft.

Unfortunately, many consumers learn that their identity has been stolen after some damage has been done.

• You may find out when bill collection agencies contact you for overdue debts you never incurred.
• You may find out when you apply for a mortgage or car loan and learn that problems with your credit history are holding up the loan.
• You may find out when you get something in the mail about an apartment you never rented, a house you never bought, or a job you never held.

What should you do if your identity is stolen?

Filing a police report, checking your credit reports, notifying creditors, and disputing any unauthorized transactions are some of the steps you must take immediately to restore your good name.

Should you file a police report if your identity is stolen?

A police report that provides specific details of the identity theft is considered an Identity Theft Report, which entitles you to certain legal rights when it is provided to the three major credit reporting agencies or to companies where the thief misused your information.  An Identity Theft Report can be used to permanently block fraudulent information that results from identity theft, such as accounts or addresses, from appearing on your credit report. It will also make sure these debts do not reappear on your credit reports. Identity Theft Reports can prevent a company from continuing to collect debts that result from identity theft, or selling them to others for collection. An Identity Theft Report is also needed to place an extended fraud alert on your credit report.

You may not need an Identity Theft Report if the thief made charges on an existing account and you have been able to work with the company to resolve the dispute.  Where an identity thief has opened new accounts in your name, or where fraudulent charges have been reported to the consumer reporting agencies, you should obtain an Identity Theft Report so that you can take advantage of the protections you are entitled to.

In order for a police report to entitle you to the legal rights mentioned above, it must contain specific details about the identity theft.  You should file an ID Theft Complaint with the FTC and bring your printed ID Theft Complaint with you to the police station when you file your police report.  The printed ID Theft Complaint can be used to support your local police report to ensure that it includes the detail required.

A police report is also needed to get copies of the thief’s application, as well as transaction information from companies that dealt with the thief.  To get this information, you must submit a request in writing, accompanied by the police report, to the address specified by the company for this purpose.

How long can the effects of identity theft last?

It’s difficult to predict how long the effects of identity theft may linger. That’s because it depends on many factors including the type of theft, whether the thief sold or passed your information on to other thieves, whether the thief is caught, and problems related to correcting your credit report.

Victims of identity theft should monitor financial records for several months after they discover the crime. Victims should review their credit reports once every three months in the first year of the theft, and once a year thereafter. Stay alert for other signs of identity theft.

Don’t delay in correcting your records and contacting all companies that opened fraudulent accounts.  Make the initial contact by phone, even though you will normally need to follow up in writing.  The longer the inaccurate information goes uncorrected, the longer it will take to resolve the problem.

What can you do to help fight identity theft?

A great deal!

Awareness is an effective weapon against many forms identity theft. Be aware of how information is stolen and what you can do to protect yours, monitor your personal information to uncover any problems quickly, and know what to do when you suspect your identity has been stolen.

Armed with the knowledge of how to protect yourself and take action, you can make identity thieves’ jobs much more difficult. You can also help fight identity theft by educating your friends, family, and members of your community. The FTC has prepared a collection of easy-to-use materials to enable anyone regardless of existing knowledge about identity theft to inform others about this serious crime.

I hope this helps but remember you can accesses more information @ http://www.ftc.gov/bcp/edu/microsites/idtheft/.

Is Bush’s $ 700 Billion dollar bail-out going to help your credit?

Wow – 700 Billion! How many zero’s is that anyways? $700,000,000,000…well let’s just say it has more zeros than I’ve ever seen.

The question however is – Will this help?

The short answer…Yes!

Don’t get me wrong. I’m not in the habit of saying – “let the tax payers bail out the fat cats.” In fact I hate the fact that we have to bail-out greedy Wall Street fat cats that are supposedly smarter than you and I.

I am also concerned about the fact that we are rewriting our financial laws at such a turbulent time. From experience, we tend to overreact in situations like this and heavily-lobbied lawmakers tend to take advantage. I do love the American way – Capitalism. But are the new financial laws going to over-regulate the markets and move us closer to socialism? I know some of you like that word, but it worries me.

By the way, where are we getting the money from? Do we have it sitting around in some huge taxpayers’ checking account?

Nope! We have to borrow the money and add it to the debt we have already accumulated. Who keeps loaning our government that kind of money and can I get a loan? The Chinese and World Banks must have some amazing faith in our government’s ability to repay. We should all strive to earn the credit rating our government has. I’m not sure if it’s deserved, and I’m hopeful one day our politicians might choose another option than to put us and our children’s children in greater debt.

In my estimation this isn’t a bail-out of the fat cats on Wall Street, but a bail-out of the American people. Most lawmakers understand, if something isn’t done ASAP our entire financial system may fail. Yes, it’s that bad…or at least that’s what they are telling us.

I’m not excited about us dropping into a 30’s style depression right now. I missed the first one and I am hoping to dodge this one. So I am giving our government the benefit of the doubt.

But let’s look at the actual situation. What the government is talking about is purchasing 700 billion in complex Wall Street securities. Currently these securities have zero value, because of the sub-prime mortgage collapse.

Let me explain the zero value. No one knows what percentages of these securities are tied up in bad sub-prime loans. Therefore they can’t put a value on them today. So these securities do have value, but until things play themselves out – no one knows exactly how much. Unfortunately, the Wall Street institutions holding these securities can’t wait, because all the uncertainties are causing them to fail right now.

So the government is purposing to buy these securities and hold them until they can be valued. When the housing market recovers and depending on how the securities perform… the tax payers may even make some money out of this. I’m not holding my breath for that scenario, but I am hopeful we will make a chunk of our investment back and in the mean time save our way of life.

Here is the effect this bail-out will have on normal people like you and I and our credit. This will free up money for the Investment Banks to put into our economy. That will put you in a much better situation to refinance your house, get a car loan, or to get a new credit card and keep the economy going. That is why you need to work on improving your credit. So when you need the credit, you will get the favorable rates you want. I am hopeful some of you will use the free advice I provide on how to improve your credit.

I feel obligated, at this point, to give you a Public Service Message. Do not bury yourself in debt like our government is doing.

I’m not sure if this bail-out is the best options available, but because of the circumstances I am supporting it and crossing my fingers…all of them.

A good letter to the credit bureau – Letter #1 Dispute

If you want to improve your credit, than you have to remove negative items off your credit report. I have already outlined the step-by-step process to repair your credit reports here. As you recall step #3 is to dispute negative items.

Some of you may ask – is this legal? YES! The FCRA protects your rights against creditors and CRA’s. Many credit reports are filled with inaccuracies and these inaccuracies are bringing your credit score down and causing you to pay extra in interest and fees.

The following is a sample letter requesting the removal of inaccurate information. Always include any copies of proof you may have. It never hurts to include the consequences that have resulted from this wrongful information as well.

Make sure you send all letters certified – return receipt requested and make copies of everything. Here is a free credit dispute letter.

DISPUTE LETTER

Date:

Dear Sir/Madam:

I recently obtained a copy of my credit report.  I am very upset because of the inaccurate information in my credit report. The following information is reported incorrectly and I want them removed:

#1.     Creditor Name:

          Account number:

          The information regarding this account is inaccurate because ____________

          _____________________________________________________________

          The following supporting documents are enclosed for your review:

• 1. ______________________________________________
• 2. ______________________________________________

#2.     Creditor Name:

          Account number:

          The information regarding this account is inaccurate because _____________

          ______________________________________________________________

          The following supporting documents are enclosed for your review:

• 1. ______________________________________________
• 2. ______________________________________________

I am requesting that you investigate those items indicated, and promptly delete any unverifiable, inaccurate, or outdated information from my credit report.  In addition, I am requesting a description of how the investigation was conducted along with the name, address, and telephone number of anyone contacted for information.

My full name is: ___________________________________________________

My Social Security # is: _____________________________________________

My date of birth is: _________________________________________________

My home phone number is: __________________________________________

My address is: ____________________________________________________

City: ___________________________ State: _______ Zip Code: ___________

I have enclosed a copy of my identification as proof of identity.

Please send me an updated copy of my report, and notification that items have been
deleted.

Thank you for your prompt attention in this matter.

Sincerely,
________________________________________(Your Signature)

________________________________________(Your Name Printed)

How investment banks collapsing affects your credit.

By now you have probably noticed the wheels are coming off the financial system and investment banks are dropping like flies. The credit collapse has claimed financial monsters such as Lehman Brothers, Merrill Lynch, Bear Stearns and others are in trouble also.

Why are they failing?

All of these institutions have one thing in common… they all are heavily invested in securities linked to the sub-prime mortgage market.

Prior to the mortgage market collapse, Wall Street was eager to buy subprime loans and package them into complex securities and sell them to investors. As long as housing prices continued to soar, everything was fine. But once the housing market began to decline, borrowers began to default on mortgages and that started the domino effect.

As these mortgages defaulted it caused the complex securities (that Wall Street created from those mortgages) to crumble. With these investments now considered high risk, it was inevitable that these financial institution stocks would take a major hit. As a result, some of these institutions have seen the price of their stocks plummet upwards of 90%.

How does this affect your credit?

These financial institutions are investment banks, so people don’t have savings accounts, mortgages or pensions in their names. But indirectly, much of the money that works its way into your pocket book as loans are generated from these institutions. As they fail, it could drastically limit sub-prime loans made to the public.

The collapse of these investment banks stirs uncertainty on Wall Street. As Wall Street remains rattled, it could limit the amount of money available to lend to consumers.

Wall Street is already skittish about sub-prime mortgage loans, but this is working its way into all other types of sub-prime loans as well (auto, personal, credit cards, etc…). So if your credit profile is less than good or excellent, then your ability to borrow would be greatly reduced.

Many subprime lenders have tightened the purse strings, because the availability of money for them to lend has dried up.

What do you need to do?

Now it’s more important than ever to improve your credit. The sub-prime lending market is drying up and you need to improve your credit to maintain your borrowing power. You must be proactive! This means you should concentrate on two aspects 1) repairing your credit report and 2) building positive trade lines to increase your credit score.

How Can Debt Collectors Gather Information On You? Why Should I Care?

The area of the law that governs how debt collectors can collect information on you is called “Acquisition of Location.”  This law limits the tactics of debt collectors, but you should still be aware of what they are doing behind the scenes. Here is what the law says:

Any debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer shall:

1. identify himself, state that he is confirming or correcting location information concerning the consumer, and , only if expressly requested, identify his employer;
2. not state that such consumer owes any debt;
3. not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information;
4. not communicate by post card;
5. not use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of a debt; and
6. after the debt collector knows the consumer is represented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney’s name and address, not communicate with any person other than that attorney, unless the attorney fails to respond within a reasonable period of time to communication from the debt collector.

If any of your rights are abused, make sure you document the time and event; you may be able to use that information against the creditor to either forgive the debt, get them to remove the item from the bureaus and/or recover monetary damages.

Know your rights and make sure no one abuses them.

What is a credit score?

A credit score is a number based on a statistical analysis of a person’s credit file. This score represents the creditworthiness of that person, which is the perceived likelihood that the person will pay debts in a timely manner. A credit score is primarily based on credit report information. Lenders use this score to evaluate the potential risk and use it to qualify a consumer for a loan and at what interest rate.

Here is what MyFico.com says about credit scores:

When you apply for credit – whether for a credit card, a car loan, or a mortgage – lenders want to know what risk they’d take by loaning money to you. FICO® scores are the credit scores most lenders use to determine your credit risk. You have three FICO scores, one for each of the three credit bureaus: Experian, TransUnion, and Equifax. Each score is based on information the credit bureau keeps on file about you. As this information changes, your credit scores tend to change as well. Your 3 FICO scores affect both how much and what loan terms (interest rate, etc.) lenders will offer you at any given time. Taking steps to improve your FICO scores can help you qualify for better rates from lenders.

For your three FICO scores to be calculated, each of your three credit reports must contain at least one account which has been open for at least six months. In addition, each report must contain at least one account that has been updated in the past six months. This ensures that there is enough information – and enough recent information – in your report on which to base a FICO score on each report.

About FICO scores:

Credit bureau scores are often called “FICO scores” because most credit bureau scores used in the U.S. are produced from software developed by Fair Isaac and Company. FICO scores are provided to lenders by the major credit reporting agencies.

FICO scores provide the best guide to future risk based solely on credit report data. The higher the credit score, the lower the risk. But no score says whether a specific individual will be a “good” or “bad” customer. And while many lenders use FICO scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable for a given credit product. There is no single “cutoff score” used by all lenders and there are many additional factors that lenders use to determine your actual interest rates.

Other name for FICO scores:

FICO scores have different names at each of the credit reporting agencies. All of these scores, however, are developed using the same methods by Fair Isaac, and have been rigorously tested to ensure they provide the most accurate picture of credit risk possible using credit report data.

Credit Reporting Agency	FICO Score
Equifax	BEACON® Score
Experian	Experian/Fair Isaac Risk Model
TransUnion	EMPIRICA®

More than one credit score:

In general, when people talk about “your score”, they’re talking about your current FICO score. However, there is no one credit score used to make decisions about you. This is true because:

• Credit bureau scores are not the only scores used: Many lenders use their own credit scores, which often will include the FICO score as well as other information about you.
• FICO scores are not the only credit bureau scores: There are other credit bureau scores, although FICO scores are by far the most commonly used. Other credit bureau scores may evaluate your credit report differently than FICO scores, and in some cases a higher score may mean more risk, not less risk as with FICO scores.
• Your credit score may be different at each of the main credit reporting agencies: The FICO score from each credit reporting agency considers only the data in your credit report at that agency. If your current scores from the credit reporting agencies are different, it’s probably because the information those agencies have on you differs.
• Your FICO score changes over time: As your data changes at the credit reporting agency, so will any new credit score based on your credit report. So your FICO score from a month ago is probably not the same score a lender would get from the credit reporting agency today.

What’s not in your FICO score?

FICO scores consider a wide range of information on your credit report. However, they do not consider:     

• Your race, color, religion, national origin, sex and marital status: US law prohibits credit scoring from considering these facts, as well as any receipt of public assistance, or the exercise of any consumer right under the Consumer Credit Protection Act.
• Your age: Other types of scores may consider your age, but FICO scores don’t.
• Your salary, occupation, title, employer, date employed or employment history: Lenders may consider this information, however, as may other types of scores.
• Where you live.
• Any interest rate being charged on a particular credit card or other account.
• Any items reported as child/family support obligations or rental agreements.
• Certain types of inquiries (requests for your credit report): The score does not count “consumer-initiated” inquiries – requests you have made for your credit report, in order to check it. It also does not count “promotional inquiries” – requests made by lenders in order to make you a “pre-approved” credit offer – or “administrative inquiries” – requests made by lenders to review your account with them. Requests that are marked as coming from employers are not counted either.
• Any information not found in your credit report.
• Any information that is not proven to be predictive of future credit performance.
• Whether or not you are participating in a credit counseling of any kind.

Now you know the basics of a credit score.

How to repair your Credit Bureau – WITHOUT PAYING!

The Fair Credit Reporting Act (FCRA) was enacted to protect consumers against the reporting of inaccurate, misleading or obsolete information.

The FCRA provides a list of rights and procedures you can use in cleaning up any negative marks you may have on your credit reports. Remember you have to do this individually with each Credit Reporting Agency (CRA) Equifax, Experian, & TransUnion.

Just follow these step-by-step processes to repair your credit report.

Step 1: The first step is to get a copy of your credit report from all three of the CRA’s. Remember in an earlier post I talked about how to get a free copy.

Step 2: Analyze your credit report. You will want to overlook the credit report and highlight every negative item. You will also want to rank the negative items according to the amount of damage they are doing to your overall credit picture. Rank the most damaging information first on down to the least. Here is the list of items starting from the most damaging.

• Bankruptcy
• Foreclosure
• Repossession
• Loan Default
• Court Judgments
• Collections
• Past due payments
• Late Payments
• Credit Rejections
• Credit Inquiries

Step 3: Start disputing the negative items. In your initial challenge, don’t dispute the information with a court record, repossession, foreclosure, or settled account. Save disputing this information for the next round of disputes. Start off the reason for your dispute on a negative listing whenever possible as “not mine”.

Step 4: Have proof! Make sure you send everything registered or certified mail. This is important! You can use this later to leverage the CRA’s if they don’t respond in the time frame required by law. Also you will need to make copies of any and all letters you have mailed out. You might need this later in case any of the items you have worked to remove reappears.

Step 5: Wait for the credit bureaus to respond. Once the credit reporting agency has received your dispute letter, they are obligated to investigate. This obligation is not contingent upon you having been denied credit. According to the FCRA, the credit bureaus must take the following steps:

• The credit reporting agencies must resolve consumers’ disputes within 30 days limit, unless you have used the services of annualcreditreport.com, then the bureaus can take up to 45 days.
• In response to consumers’ complaints that documentation in support of their disputes was disregarded, the credit bureaus have to consider and transmit to the furnisher all relevant evidence submitted by the consumer the first time.
• Consumers will receive written notice of the results of the investigation within five days of its completion, including a copy of the amended credit file if it changed based on the dispute.
• Once information is deleted from a credit file, the credit bureaus can not reinsert it unless the entity supplying the information certifies that the item is complete and accurate and the credit bureau notifies the consumer within five days.

Step 6: Evaluate the results of your repair efforts and repeat your credit bureau dispute with the ones you were unsuccessful with. You will want to change the reason for the dispute so the credit bureaus will have something new to investigate. Some of the reasons you can use are; not mine, paid on time, wrong amount, wrong account number, wrong date, wrong balance…I’m sure you get the idea. Make sure you become more insistent with each and every round of dispute letters.

Hopefully these credit repair tips will reward you with a higher credit score!

How to get a free copy of your credit report.

The first thing you will need to do is obtain a copy of your personal credit report from all three of the major credit report agencies.

AnnualCreditReport.com is a centralized service for consumers to request free annual credit reports. It was created by the three nationwide consumer credit reporting companies – Equifax, Experian, and TransUnion.

AnnualCreditReport.com provides consumers with the secure means to request and obtain a free credit report once every 12 months from each of the three nationwide consumer credit reporting companies in accordance with the Fair and Accurate Credit Transactions Act (FACT Act).

AnnualCreditReport.com offers consumers a fast and convenient way to request, view and print their credit reports in a secure internet environment. They also provide options to request reports by mail.

To get a free copy of your three major credit reports just visit www.annualcreditreport.com.