Is the Credit Bureau Picking On Me?
The credit bureau (your local version of
a data bank) does not randomly pick on anyone. They don't have
any influence or control over what your creditors tell them about
your payment history.
They Just Report the Facts!
Credit Bureaus are regulated by federal
and state laws to strictly report the "Facts" about
your payment history for: car loans, personal loans, credit
cards, mortgages, etc. However, there is a large degree of
"human error". Credit reports are usually pretty accurate and
rarely 100% correct.
O.K. I'm ready to buy a home.
What will my credit report mean?
Whether you are applying for a credit
card, book club or the REALLY BIG ONE, your mortgage, your
personal credit report is the single most important factor in
determining whether you get mortgage approval and what rate you will pay. A
consistent income and substantial down payment (assets) will help, but will not
eliminate bad
credit.
"Uh oh, Mr. & Mrs. Homebuyer, you have some credit problems. From time to time, almost everyone has credit
problems. In most cases, they can be resolved. Your Spokane Mortgage Group Loan Officer
can set up a pre-application appointment
to assess your credit report. Other information that will be
needed and evaluated are: length and stability of employment,
monthly income, rental or mortgage history and assets available
for your purchase.
A Loan Officer will help evaluate your credit situation based on the
seriousness of your credit problems.
What Can I Do to Dispute My Credit
Rating?
This is one situation where patience is
the only virtue. To correct an inaccurate credit report, or to
obtain an actual copy of your credit report, do the following:
Visit or call the local credit bureau. (Keep in mind that the
credit bureau is only reporting exactly what your credit grantors
have told them.)
Start by disputing the discrepancy directly with the lender. If the lender
agrees it is incorrect, they will re-report to the credit bureau. This
will still take 30 - 60 days to remedy. In the mean time, get a letter
from the lender of the inaccuracy. If the lender is unwilling to
cooperate, you must be able to prove your point by
offering proof (cancelled check or receipt) of the payment in
question. If proof cannot be furnished, you may end up paying again, just
to correct the report. Save those receipts and cancelled checks.
Inaccuracies can usually be overcome with patience and some additional documentation
stating your case.
I Can't Even Get a Credit Card.
How Do I Establish Good Credit?
There are several ways in which to
obtain credit or change your credit to a favorable rating.
- Make a trip to the credit bureau to
evaluate your current rating with a consumer assistance
counselor.
- Apply for a secured credit card by
going to your local bank and explaining your situation to
the manager. You may have to deposit money into an
account that the bank will hold to guarantee receiving
your payments.
- Use the credit regularly and pay the balance in full every month. Don't
change your buying habits because you have credit.
- Establish a payment plan with any
past due accounts or pay any past due accounts in full if
possible.
How Long Will My Credit History
Follow Me?
Most accounts remain on your credit file
for seven years with the exception of PAID SATISFACTORY accounts
and BANKRUPTCIES, which remain for 10 years.
Is Big Brother Everywhere?
What Happened to My Right of Privacy?
- Fair Credit Reporting Act.
- Federal Equal Credit Reporting Act.
- The Right of Financial Privacy Act.
TOP OF PAGE
The FICO Credit Scoring System
Introduction to Credit Scoring
Large institutions which grant credit to the public have started to use the
FICO credit scoring system rather than the manual underwriting of credit
reports. This page is an introduction to understanding how this credit scoring
system will work. The FICO scoring is currently being used in underwriting 2nd
Trust Deeds, higher loan to value loans, and the riskier A- through D type
paper.
Credit scoring, pioneered by Fair, Isaac, has been used by credit grantors
since the 1950's. Credit scoring is widely used in many industries to assist
with a variety of credit decisions.
Credit scoring assesses credit quality of an individual about whom a decision is
being made concerning the extension or use of credit. The credit assessment is
made by means of a scorecard which calculates a numeric value, or score,
for each account holder that the credit grantor wants to evaluate.
Score calculation is based upon information that has proven to be indicative
of future credit performance.
Credit scores rank applicants for credit, or existing credit accounts, by
risk.
The scorecard is comprised of characteristics, which are items of past
and present information that are predictive of future credit performance. For
each characteristic, there are a number of attributes, or
"answers". Each scored individual will have one attribute for each
characteristic, based on their credit report at the time of scoring. Some of the
characteristics looked at are:
1. Number of bank card trade lines
2. Worst level of delinquency on an installment loan
3. Number of months in file
4. Number of months since most recent bankcard opening
5. Number of months since the most recent derogatory public record
6. Delinquency on accounts
7. Number of accounts with balances
8. Length of revolving credit accounts
9. Date of inquiries
10. Number of retail accounts
These are just a few of the items that are looked at to determine the FICO
Score. Most lenders consider a 680 score or above to be satisfactory. If the
rating is lower than a 680, than other financing is available, but not at the
same rate.
As mentioned above, this scoring system is being used on certain loans only
at this time. But it is looking like the wave of the future, so don't be
surprised if you see it soon in your neighborhood!
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