Credit Reports and Credit Scores

WHAT GOES INTO YOUR CREDIT REPORT… AND WHO USES IT?

WHAT IS A CREDIT REPORT?

A credit report is a summary of your financial reliability – for the most part, your history of paying debts and other bills. It is prepared by credit bureaus primarily for use by lenders, employers and others who, under federal law, have a legitimate need for the information, such as when you apply for a loan, an insurance policy or an apartment.

WHAT IS IN A CREDIT REPORT?

A credit report contains a large amount of information about you and your credit. In general, a credit report contains four parts:

  1. Identifying information
    Name, address, Social Security number, phone number, date of birth, and a list of employers.
  2. Public record information
    Gathered from local courthouses and used to determine if you have previous defaults or legal judgments against you i.e. tax liens, court rulings or bankruptcies.
  3. Credit history information
    A history of your accounts with different companies that have granted credit to you. This could be banks, retail stores, or mortgage companies. For example, your mortgage company would list mortgage balance, payment and how timely you pay.
  4. Inquiries
    A section that lists the creditors or other parties that have requested your credit report.

HOW DO THE CREDIT BUREAUS GET THIS INFORMATION?

Lenders voluntarily supply the information to credit bureaus on an ongoing basis; no federal laws require companies to submit the data. Having access to current and reliable information about you helps lenders make informed decisions and offer you financial products and services more quickly.

LENDERS INTERPRETATION OF CREDIT REPORTS

If you apply for a loan, lenders need to view and analyze your credit report to determine your credit worthiness. They may look for certain negative or positive aspects of your credit report to determine whether or not you might be a good candidate for a loan. Here are some points of interest a lender might evaluate:

  • Inquiries
    If you have a large amount of credit inquiries, a lender may view this as risky behavior due to your large need for credit.
  • Credit Accounts
    If you have an account that you have not used consistently, it is not always necessary to close it because you have established history with this company. But it is advisable to close accounts that you do not ever use to avoid losing track of your credit and increasing your chances of identity theft.
  • Payment
    Any missed payments are looked upon negatively and will raise your risk level.
  • Credit Lines that are Maxed-out
    This will be interpreted as you being strapped for credit. To prevent this, always keep your balance below half of your limit.

HOW CAN I GET A COPY OF MY REPORT?

The Fair and Accurate Credit Transactions Act (FACT Act) enables you to obtain a free copy of your credit report once a year from each of the three major credit bureaus (Equifax, Experian and Trans Union). The three nationwide consumer reporting companies have set up one central website, toll-free number and mailing address through which you can order your free annual report. To order, go to annualcreditreport.com or call 877-322-8228. It is recommended that you review your credit report annually. It is especially important to review your report before making a major purchase so that you can correct any errors before it slows down your credit approval or prevents you from getting the best possible loan terms.

HOW DO I CORRECT WRONG OR INCOMPLETE INFORMATION IN MY CREDIT REPORT?

  1. Immediately notify the credit bureau, in writing.
    Federal law requires credit bureaus to investigate your complaint (generally within 30 days), send you a prompt response, and correct any errors.
  2. Identify each item in your credit report that you dispute.
    State the facts and request a correction. The law also requires the source of inaccurate information to correct the record at the credit bureaus.
  3. Send your letter by certified mail.
    Contact the company that provided the inaccurate or incomplete information and request a correction of its records, too. If a credit bureau’s investigation does not resolve your concerns, the law allows you to submit a brief statement about the matter that must be attached to our credit report and provided to anyone that accesses your report in the future.

HOW DO I PROTECT MY CREDIT FILE?

Community Bank is pleased to partner with Equifax, a world-wide leader in the management and protection of personal and commercial credit information. Equifax Credit Watch™ is a unique program that helps protect you from identity theft and fraud by alerting you to major changes in your Equifax Credit Report™ before serious damage is done. Visit Equifax at www.equifax.com.

If you believe your financial information has fallen into the wrong hands, you can place a “Fraud Alert” on your credit file. A Fraud Alert helps prevent anyone from opening a new account in your name. They act as a red flag on your credit report, visible only when businesses access your file to possibly extend you credit.

To place an alert on your account, call one of the three credit reporting agencies and ask them to flag your credit file for fraud. Within 24 hours, an alert will be attached to your credit file and your name will be removed from pre-approved credit and insurance applications for two years. Experian, Equifax and Trans Union share data, so after calling one company, the other two will be notified. It is best to confirm that all companies reflect your fraud alert after placing it. If you need to apply for a loan during the period that your credit file is on alert, notify your lender. To remove a fraud alert, you will need to send requests in writing to one of the three credit-reporting agencies.

WHAT IS A CREDIT SCORE AND WHY IS IT IMPORTANT?

A credit score is a three digit number calculated by a credit bureau, a lender or another company for use in making a decision on a loan application or other product or service. Credit scores range from 300-850. Many lenders use a system developed by Fair Isaac and Company call the “FICO Score”. Think of credit scoring as a point system based on your credit history, designed to help predict how likely you are to repay a loan or make payments on time.

In general, the better your credit score the better your chances are of getting a loan with an attractive interest rate. A lower credit score yields a higher rate because the lender needs to compensate for the risk he or she is taking on with the customer. So, when it comes to getting a good loan, it’s important that your credit report – the basis for your credit score – is accurate, complete, and in the best shape possible.

INFLUENCES ON A CREDIT SCORE

There are multiple factors that can influence your credit score. These factors can have a positive or negative effect on your credit score. Listed below are just a few of the factors that you need to be aware of when considering your credit. The chart following shows how the factors can weigh on your credit score.

  1. Payment history
    When a customer pays his or her bills (on time) it results in a better credit score. Late payments on loans, a past bankruptcy, debt collections or a court judgment ordering you to pay money as a result of a lawsuit will negatively affect your credit score.
  2. Outstanding debt
    How much a customer owes on a car, house, or credit card. Lenders want to be sure that the debt you owe is manageable. Lenders get concerned if you have a significant amount of debt compared to your income.
  3. Credit lifespan
    The amount of time that a customer has established credit. The longer the established credit, the higher the score.
  4. Number of inquiries
    If a customer requests a multitude of credit cards, it reflects a lower credit score. A lender will interpret this as either a customer is applying for a lot of credit or are in some sort of financial trouble.

Credit Score

WAYS TO IMPROVE YOUR SCORE

There are a number of ways you can improve your credit score. If you follow the guidelines listed below, your credit could possibly be improved!

  • Review your credit report for any errors or inconsistencies.
  • Keep a low balance on credit cards and pay down whenever possible. A balance of 50% of your limit is a safe level to have, anything over that is generally too high.
  • Pay your bills on time. If a bill is more than 30 days late, it will be reflected on your credit report.
  • Don’t pull, or let anyone else pull, your credit score unless absolutely necessary. Watch out for store clerks that ask if you would like to apply for their store card. Many customers are tricked into thinking they are just applying for a rewards benefit card without realizing that it is an actual credit card.

HOW CAN I GET MY CREDIT SCORES?

Your scores, along with an explanation of how the scores was derived, typically are available online for a fee.

Community Bank is taking substantive measures to protect the safety and security of your accounts. If you have any questions or concerns regarding the protection of your financial identity, please visit your nearest Community Bank branch location and speak to one of our bankers.

RESOURCES AND CONTACT INFORMATION

Equifax
www.equifax.com
888-766-0008

Experian
www.experian.com

888-397-3742

TransUnion
www.transunion.com

800-680-7289

Federal Trade Commission
www.ftc.gov
877-382-4357

Free Credit Reports
www.annualcreditreport.com
877-322-8228    

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