One of the most significant pieces of legislation to address unfair lending practices and consumer rights is the Fair and Accurate Credit Transactions Act of 2003. The Fair and Accurate Credit Transactions Act address identity theft, as well as allowing the consumer to receive a free copy of their credit report from each of the credit reporting agencies every year.
When you apply for a mortgage, one of the first things the mortgage lender will do is look at your credit report. Credit reports contain information about how you have used and are using your credit lines. They contain information like your payment history, delinquent payments, and outstanding debt. Mortgage lenders use this information to help decide how much of a risk you would be to offer a loan to.
Credit reports are nothing new and have been used by businesses for thousands of years. In concept, using a credit reporting system makes sense, as it allows businesses to more easily analyze risk. However, in the past a great deal of personal information, such as race and religion, was included in credit reports and this information was often used to discriminate against a prospective borrower. There have been many pieces of legislation to address this issue and keep the lending industry more honest, although its success is debatable.
The information contained in a credit report is maintained by one of three credit reporting agencies. Businesses report information to these agencies, who then compile a report that can be used by mortgage lenders and others who offer credit lines.
Up until very recently, there were a number of hurdles that made it difficult and costly for a consumer to view their credit report. It is very easy for an error to end up on your credit report and without being able to easily and inexpensively check, many consumers were penalized for these mistakes when they applied for a mortgage or loan.
The Fair and Accurate Credit Transactions Act addressed this issue and requires that each of the three credit reporting agencies provide consumers with one free copy of their credit report every year. However, in some states, the credit reporting agencies have fought this law by making it more difficult and complicated to receive these reports.
Another big part of the Fair and Accurate Credit Transactions Act is aimed at preventing identity theft. Under the Fair and Accurate Credit Transactions Act, consumers who think they might be about to be the victim of identity theft can place a fraud alert on their credit report, ensuring that potential creditors are more diligent in checking ones identity and providing some recourse if identity theft occurs. It also set up some red flag rules, which were to be developed by the credit industry to help detect fraud, although these have not been fully implemented.
The Fair and Accurate Credit Transactions Act also sets up some rights for those who have been the victim of identity theft. The credit reporting agencies are now required to block cases of identity theft from being visible on credit reports, providing the consumer has provided sufficient evidence of the identity theft. The credit industry is also required to be more corporative when investigating identity theft.
The law also requires that credit card merchants print no more than the last five digits of a credit card on a receipt.
The effectiveness of this law and others that address the credit and mortgage industry are highly debatable and many institutions deliberately try to find ways to get around these law.
A Credit Score is a numerical value between 300 and 850 that is used by lenders to determine the risk offering someone a loan. Credit scores are based off of a number of factors, including the number of different lines of credit a person has, their payment history, and how long they have had credit. When applying for a mortgage, credit scores are one factor that are considered by mortgage lenders, so it is important to understand the relationship between credit scores and mortgages.
Credit scores are not exactly new and have been around for many years. The FICO credit score is the most common type used, but there are others as well, specifically those offered by the three credit reporting agencies. However, up until relatively recently, the average consumer was not able to see their credit score. This changed in 2003 with the passage of the Fair Credit Reporting Act, which required credit reporting agencies to provide consumers with their credit score for a reasonable fee.
There are many factors that goes into a credit score and a persons debt level is actually not what the credit score is predominantly based upon. Instead, only about 30% of the credit score is based off of a persons current debt, with more weight being placed upon how the person handles debt, as well as their credit history and payment history.
In times past, getting a home mortgage was a much more personal process. The loan officer took the time to get to know the person and made a subjective decision based upon the information available to them. Today, however, much of this personal touch has been lost, replaced by mathematical formulas that are processed by computers. These formulas take into account the persons credit history, their credit report, and their credit score, determining mathematically the risk of offering the prospective lender a home mortgage.
Since so much of the mortgage approval process has been automated, it is essential to have a good credit report and as high of a credit score as possible. Studies have been shown that the higher a credit score is, the lower the mortgage rate offered will be.
For example, according to myfico.com, in 2007, a person with a credit score between 760 and 850, which is considered to be very good, received an average interest rate of 6.3%. A person with a credit score between 500 and 579, on the other hand, received a interest rate of 9.9%. This shows the importance of having a high credit score before applying for a home mortgage.
Since having a high credit score is such an important factor when applying for a mortgage, it is a good idea to spend time fixing any areas and maintaining a healthy credit score before applying for a mortgage.
One of the most important steps of maintaining a healthy credit score is taking care of any errors on your credit report, which even though they may simply be a mistake, such as a creditor not reporting a payment. Even though the mistake is not your fault, it still affects your credit score the same, so finding and fixing errors on your credit report is essential.
Paying bills on time is also extremely important to help maintain a healthy credit score and is one of the main factors prospective mortgage lenders consider when considering a mortgage application. If you have missed a payment, always make sure all of your payments are up to date before applying for a mortgage or other type of loan.
It is also important to pay down your credit lines based upon the amount owed and interest rates of the credit line. For instance, it is important to pay down those credit lines with higher interest rates sooner, rather than later, which not only helps your credit score, but also helps you save money.
Credit scores are a numerical value between 300 and 850 that is based upon a persons credit report. The credit score is intended to provide prospective lenders with a way to evaluate a persons creditworthiness, with credit scores between 760 and 850 being classified as the best. Credit scores are used by many different types of lenders, with the mortgage industry usually relying very heavily upon credit scores. Having a high credit score can be very important when applying for a mortgage and getting a good interest rate, especially in today’s market where lenders are much more careful about who they lend too.
There are several companies that offer credit scores, including each of the three different credit reporting agencies, but the credit score compiled by Fair Isaacs Corp, called a FICO score, is the standard in the lending industry.
While credit scores have been around for over fifty years, it was not until 2003 that the average consumer could easily and inexpensively view their credit score. This came as part of the Fair Credit Reporting Act of 2003, which required all credit reporting agencies to provide individuals their credit reporting score at a fair price. Now, credit scores are available for between $6 and $16.
Credit scores are based upon the information in a persons credit report, so it is not possible to directly change your credit score if there is a problem. Instead, it is necessary to fix problems with your credit report, which will in turn raise your credit score. This is why it is so important to regularly check your credit report for errors and fix them as soon as possible.
As a consumer, it is also important to pay all bills on time and not max out your credit lines. This is because credit scoring agencies place more emphasis on your payment history than they do on your level of debt. Late payments, especially those sent to a collection agency, can have a very negative impact on a credit score.
Requesting new lines of credit too frequently can reduce your credit score, so instead it is better to try to limit your requests for new credit to as short of a time period as possible. This is especially important when trying to repair bad credit, because many people will begin applying for each credit card offer they get, but this actually lowers a persons credit score.
It is also important to balance your debt in a smart and efficient manner. In another words, pay off debts that have higher interest rates or less favorable terms first and try to avoid transferring debt among credit lines too often.
Since a big part of having a good credit score involves using your credit responsibly, most loan officers suggest using your credit, but not exceeding 30% to 50% of your credit limit. Of course, this should be taken with a grain of salt, because it is in their best interest for you to use credit.
Another factor that goes into a credit report is the length of your credit history. Rather than canceling credit cards you are not using, it is typically better to simply destroy the credit card so you can not use it, but keep the account open. This way you can extend your credit history, without actually using it. Instead, begin using debit cards, which offer the same functionality as a credit card would, without the extra fees.
Having a high credit score can mean the difference between getting a good interest rate and getting a great interest rate. A low credit score can quite literally cost you a great deal of money, so it is important to take measures to improve and maintain a healthy credit score.
There are usually a number of factors that a lender will consider when deciding whether or not to offer someone a mortgage. For many lenders, a persons credit score is a very important consideration. Credit scores are a number between 300 and 850, which represents how credit-worthy the individual is.
Lenders and merchants have been using credit reports for thousands of years, which is basically information about a persons borrowing and spending habits that is shared among businesses. However, the credit score was not developed until 1958, when the Fair Isaac Corp implemented a system to analyze credit reports and rate them on a numerical scale.
As is the case with a credit report, credit scores are intended to provide a non-discriminatory means of evaluating a persons creditworthiness, so race, gender, and religion do not come into play.
Since the development of the Fair Isaac Corp credit scoring system, which is called a FICO score, several other companies have developed their own credit scoring system, but none have become more popular than the FICO Score.
While each of the three credit reporting agencies are required to provide a free copy of your credit report every year, there is no such requirement for your credit score. Instead, consumers must purchase their credit score, which typically costs between $6 and $16. Each of the credit reporting agencies also offer a proprietary credit score, but these scores are different than the credit score offered by the Fair Isaac Corp.
There are a number of different factors that go into a FICO credit score, which is based off of information from a each of the three credit reporting agencies. A persons FICO score considers several different factors and rates people on a scale between 300 and 850, with 850 being the highest credit score possible.
The following factors are considered when generating a credit score:
Payments:
Length of Recorded Credit History:
Different Types of Credit:
How Much is Owed:
New Credit Lines:
Each of the above factors is considered by the Fair Isaacs Corp when they generate a persons credit score. Since there are so many different factors, it is very easy for a mistake on a credit report to result in a lower credit score, which is why it is so important to regularly check your credit score for errors.
Credit reports are often used by creditors to determine how much of a risk a person would be to lend to. These reports contain information about a persons financial dealings, with some other limited personal information.
There are a number of people who could potentially view your credit report, including the government, banks and other creditors, and insurance companies. It is also possible for employers, both present and prospective, to view your credit report. This is common in professions where they are worried about company theft or embezzlement.
In fact almost anyone can see your credit report providing that they are able to offer an actual financial reason why they should be able to see your credit report. Each person is also eligible to receive three free copies of their credit report every year, one from each of the different credit reporting agencies.
Since there are so many potentially important people who could looking at your credit report, it is important to identify any problems and try to fix them as soon as possible. This can not only make it easier to receive a loan or mortgage, but can also effect many other parts of your life.
At first glance, a credit report can seem very confusing, but all of the information in a credit report can basically be divided into four sections.
Personal Information: Credit Reports are prohibited from containing information about race, religion, or sexual orientation, but they do contain a great deal of other identifying information.
This includes the persons name, aliases, current addresses, previous addresses, Social Security Number, Date of Birth, current employer, past employer, and information about husbands or wives.
Credit Information: As the name implies, credit reports contain a great deal of information about your credit history. This includes mortgages, credit card debt, unpaid debt, debt that has been sent to a collections agency, and some utility information. Also, in the case of loans it has information such as the type of loan, length, cosigners, and a two year payment history.
While the credit information is usually very inclusive, it can not include bankruptcies that are more than 10 years old or other debt that is older than 7 years.
Information from Public Records: This includes any state or country government records, including information on bankruptcies, tax liens, or other civil judgments. It can also include child support.
Recent Credit Report Requests:: This section lists the people who have requested your credit report over the last year, although it goes back 2 years for employers. Sometimes, too much activity can raise a red flag to lenders and may also be an indication of identity theft.
Credit reports are used by prospective lenders to determine if an individual is eligible to receive credit.
Since a persons credit report is one of the first things a creditor will look at, as a borrower it is important to try to fix any errors and clean up your credit report as much as possible before applying for a loan.
Credit reports are a special document that contains information about a persons financial records. It will include information about child support, debt, credit lines, mortgages, and in some cases utilities. This information details how the person has been in regards to using credit and paying it back.
While there is a great deal of personal information in a credit report, there is a lot of things that can not be printed in a credit report. This is as a result of the Fair Credit Reporting Act of 1971, which put an end to some very compromising data collection practices by credit reporting agencies.
For instance, prior to 1971, it was not uncommon for there to be information gleaned from actual surveillance in the credit report. They also often included information about race, religion, sexual preference, and criminal background. Credit reports where then used as an excuse to deny people credit, instead of determining if they were credit worthy.
Today the credit report has had the discriminatory and compromising information that was previously found in credit reports removed. Instead, the credit report is limited to only providing information about the persons finances and current debt load.
When a person misses a payment to a lender, creditor, or certain utility companies, this would be noted on the credit report.
Only debt that is relatively recent is included as well. For example, for bankruptcies, only those in the last 10 years are included in a credit report. Other types of debt, such as debt that has been sent to a collection agency, is only included for 7 years on a credit report.
Credit information is collected by three different credit reporting agencies, Transunion, EquiFax, and Experian, who store all this information and resell it as credit reports. Sometimes when applying for a mortgage, the credit report will be included in the cost of the application, but its cost should not exceed $20.
As a consumer, each credit reporting agency is required to provide one free credit report a year. It is a good idea to not get all three at once, instead spreading them out over the length of the entire year. This way, the credit report can be reviewed and corrected, then another copy can be received, which should reflect the changes. In this manner, it may be possible to not have to pay to receive your own credit report.
It is also possible to pay and receive a credit report whenever needed. However, it should be noted that creditors do look at how often a credit report has been requested and if it has been requested too much, this can count against you.
Credit reports can be viewed by a number of people, including government agencies, employers, insurance companies, and lenders.
It is also possible for many other people, t, such as landlords, to view your credit report, as long as they can provide a real financial reason.