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Have You Seen Your Credit Report Lately?
By MoonDog | May 9, 2008
A few weeks ago I took advantage of the free annual credit reports all of the credit bureaus must provide consumers. A review of all three gave me pause to consider just how many people don’t know what’s contained within their credit report.
Most consumers don’t understand who has the right to view your credit, how often they can view it and what circumstances they can view it. Moreover, many don’t understand their rights afforded them by the Fair Credit Reporting Act (FCRA).
Reviewing my credit report last year, I noted an erroneous entry from a company claiming I owed $192.00 for long distance services. Knowing this wasn’t true I had to dispute the entry with all three credit bureaus. Within 45 days the erroneous entry was removed from my credit report but I began to wonder just how inaccurate credit reporting is in the U.S.
In speaking with a representative of Experian, one of the three credit reporting bureaus along with Equifax and TransUnion, I learned some very interesting facts. The Experian representative told me “we depend on the creditors to report factual information about the consumer.”
After making that statement I asked how Experian verifies the information being reported to them. “We don’t,” she replied. “We trust those reporting to provide accurate information.”
Therein lays the problem with credit reporting in general. The credit bureaus, tasked with providing information to potential creditors, can no more verify the validity of the information contained within a consumer’s credit report than the man in the moon.
As I mentioned, every American has the right to receive a free annual credit report from all three credit bureaus. You may think that idiot singing about FreeCreditReport.com is on to something, but in reality that isn’t the site to get your reports.
All three of the credit bureaus will point you to AnnualCreditReport.com to acquire your reports. Once you’ve entered the basic information, you’ll be able to view and print your credit report from all three bureaus. It is important to note that each will provide a “report” number that must be used when referencing the report, especially if you need to file a dispute.
Once you’ve printed your credit reports, you’ll need to ensure everything is accurate. A 2004 study released by the U.S. Public Interest Research Group found that 79% of the consumer credit reports surveyed contained some kind of error or mistake. As a result, many consumers frequently invoke their rights under the FCRA to review and correct their credit reports.
Before you file a dispute it would be good to know what your rights are under the guidelines set forth by the FCRA. As with any other federal law, it’s lengthy and full of legalese but its well worth your time to review it. If you have any questions regarding the FCRA I suggest you speak with an attorney or someone familiar with credit reporting laws.
I came across this site and it appears to offer a lot of good information. It was written by a person that had major credit issues and went about the process of repairing his credit. It has links and telephone numbers to all of the bureaus and information on how to properly dispute erroneous information on your credit report.
The dispute process can be done online by visiting each of the credit bureaus web sites. You can also file a dispute by mail, but it’s a messy process, especially with Equifax and Experian. TransUnion is the only credit bureau that offers a simple form and asks for very little additional information. With Equifax and Experian, you basically have to provide what amounts to a small telephone book of information to dispute errors on your credit report.
Remember, the information on your credit report hasn’t been verified by the bureaus. Sadly, it is the responsibility of the consumer to ensure it’s correct and up to date. Moreover, the credit bureaus have made it so that disputing errors on your credit report can be time consuming. It’s a rather sad commentary knowing your time is being spent correcting the mistakes made by those reporting to the bureaus.
Now let’s take a look at the different types of queries that can be made with regard to your credit report. There are two types of queries; a “soft” query is a potential creditor, usually a credit card company, wishing to see if it would be worth their time to mail you an offer.
A “hard” query takes place, as an example, when you’re out looking for a new car. Perhaps you visit several dealers and they need to run your credit to find out if they can finance you. As a side note, never get your financing through the dealer. They are going to charge you at least two points more than what they’re being charged from their bank.
Soft queries do not have an effect on your credit score. I’ll discuss credit scores more in depth in a moment. Hard queries do have an effect on your credit score. About six years ago I had the good fortune to buy furniture from someone that worked for Citi Bank at one time. He told me hard queries will lower your credit score six points every time they’re processed.
If you happen to be window shopping and visit several stores looking for a new dining room set, keep in mind every time your credit is run, it lowers your score six points. It would also be a good idea to notify a potential creditor that your credit has been run several times recently so they know your score has dropped some.
It’s also important to know that other open accounts with various credit limits can affect your credit score. For example, let’s say you purchased a new bedroom set and paid $3000.00 over one year. Even if you’ve paid the note in full, the account will still be open unless you tell the creditor to close it. By having too many open accounts on your credit, it can lower your score and raise a red flag to potential new creditors.
Let’s turn our attention to credit scores and they’re importance in determining credit worthiness. We’ve all seen the commercials about web sites where you can obtain your credit score. Credit scores are one important element in determining credit worthiness, but they aren’t the only thing a creditor is going to look at.
If you really want to know what your credit score is, instead of going to a web site and paying $7.95, ask your bank if they’d do it. It won’t cost you anything and who better than your bank to tell you if you are credit worthy.
Now, each credit bureau uses a different means of arriving at your credit score. TransUnion uses the Empirica, Equifax uses the Beacon and Experian uses the FICO. To learn more about those, visit the same site I noted above.
Most banks consider your low end credit score to be 660. That’s not to suggest a score lower than that won’t get you financed, but your chances of doing so drop dramatically. As I mentioned a moment ago, there is another contributing factor in determining credit worthiness, and that is the debt to earnings ratio.
Depending upon the entity issuing credit, your DER can’t exceed 45% if you expect to get financed. Other factors taken into consideration are the type of loan, down payments and collateral. Those factors will affect your ability to get financed and your interest rate as well.
Keep in mind you can have a high credit score but a DER that exceeds what a creditor considers safe.
For example, you may have a credit score of 700 but your DER is 50%. While the credit score is fine, the DER is too high. It all depends on the person you’re dealing with and whether other factors that may be taken into consideration will get you financed.
Conversely, you may have a lower credit score but have a low DER. You may actually fair better than the person with the higher credit score and DER, especially if you are in a position to collateralize a loan.
Incidentally, that’s an excellent way to improve your credit worthiness. Let’s say you don’t need a loan but you’d like to improve your credit score and credit standing in general. Go to your bank and explain what you’re trying to accomplish. Take $1000.00 and put it in a one-year or even a six-month Certificate of Deposit. Borrow the $1000.00 from the bank and repay the loan over the same length of time as the CD. Actually what you’ll need to do is factor in the loan fee and interest rate the bank is going to charge you.
Here’s the beauty of a collateralized loan. Let’s say the CD pays 4% for one year. Since you’ve collateralized the loan, the bank doesn’t have to worry about getting their money back if you default. As a result, the bank should (mine definitely does this) charge you two points higher than what the CD pays.
Based on a 4% interest rate for the CD, and the bank charging you two points above that rate, the interest rate on the loan will be 6%. Most banks charge $50.00 for a loan fee. Pay the loan fee up front. You’re going to put $1060.00 in a one-year CD and borrow $1000.00 from the bank.
Over the one-year period of the CD, you’ll make $42.40 in interest. Factoring in the $60.00 interest on the loan, you’ll lose $17.60 over the life of the CD and the loan. However, is $17.60 a price you’re willing to pay to improve your credit score and overall credit standing?
If your bank isn’t willing to give you the two points over interest rate, please contact me and I’ll put you in touch with my bank.
Remember, this is your credit report and credit score. It’s up to you to ensure what is being reported is accurate and your credit worthiness depends upon your concerted efforts.
Tags: MoonDogSports.com, free annual credit reports, equifax, credit reporting bureaus, fair credit reporting act, General Topics, transunion, experian, Social IssuesRelated posts
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May 11th, 2008 at 4:58 pm
Hey Moondog, I saw your comment over on sportsonmymind.com and came over here. I like the article on credit reports–I need to get mine checked ASAP. I’ll try to subscribe and be back more often. Although I have to politely agree with MODI about the chick pics. Sure, they draw a few eyeballs, but in the long run guys can usually find more illict stuff on their own. I try to not post anything that’s not entirely SFW, personally speaking. Part of the reason is I want female readers too, ha, and thus don’t want them to feel uncomfortable. But it’s your call. Best of luck with the site.
May 11th, 2008 at 5:06 pm
MC - Thanks for dropping by. I respect your opinion and believe it or not, I have quite a few female readers that have gotten to know me and understand my modus operandi.
And hey, Halle Barry and Beyonce aren’t far behind!
Please do check your credit report - you never know what you may find. If you need any help with that, drop me a line.
Later.
May 12th, 2008 at 10:42 am
F-R-E-E…that spells free. Credit report dot com, baby!
It would be nice to live in a world where you didn’t have to fight so hard to avoid getting screwed.
As for those Cardinals…I’d be a little surprised if they can top the Cubbies over the long haul, but stranger things have happened. Wellemeyer picked the right time to emerge, but the rotation still looks a little thin behind him and Wainwright.
Lohse finally came back down to earth. I’ll resist the urge to say I told you so.
They have an odd outfield platoon. Duncan is a productive hitter…but only against righties. Ludwick is on fire, but even as a right-hander…he’s best against righties, too. Ankiel is a lefty, but hits better against lefties. Don’t these guys know the rules? An old guy like LaRussa might get confused.
They made a nice call by replacing a washed up injury-prone 3rd baseman with a…oh, wait. I’m guessing Troy Glaus inherited Scott Rolen’s powers of mediocrity when he ate him for breakfast and took his 3rd base position.
May 12th, 2008 at 1:46 pm
Ah, my fourth loyal reader. I’m shook up. The Cards are playing like we expected lately, with Isringhausen blowing (and not just saves) and the starting pitching becoming a little more suspect.
Glaus=FAIL. I’d take Rolen back in a second. I’d take you in a second at this point.
Review that credit report of yours . Don’t be alarmed at the MoonDogSports heading. It was just me trying to figure out why you are the way you are. Probably should have called a psychiatrist though.
May 13th, 2008 at 11:44 pm
Hey Moondog…this is another great non-sports blog of great importance! We have been thru 2 re-fi’s lately and were able to check our credit reports that way but its really important to stay up on it. I found several small mistakes not worth reporting as well as some interesting info that it is better to not close your cc accounts just let them fade off your credit report (takes 7 years). I made the mistake of closing a bunch of my store cc’s (macy’s etc) and it dropped my credit score. Thanks Moondog!
Oh and I must not be seeing your site right since I am using explorer…will flip over to firefox!
May 14th, 2008 at 12:17 am
Kristen - I have never owned a credit card an never will, but I imagine it isn’t any different than having any open line of credit. The guy I spoke to told me the exact opposite. Having too many open lines, especially with high credit limits can hurt you, or so he said.
I don’t know what the problem is with IE, but it’s definitely mad at us right now. I don’t use IE, in fact, I think it should be banned. Firefox is the way to go. Set your display as I outlined above and you’ll see my piece of crap site like it should look.
Thanks for dropping by sweetie.
May 15th, 2008 at 6:00 am
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