What Credit Reports Are Used For

Most of us realize that our credit report is reviewed when we apply for a credit card, mortgage, or car loan. However, it is often forgotten that your credit report is also reviewed when you apply for utility services, car insurance, life insurance, or a cell phone. With bad credit, you will be required to leave large deposits with utility companies. Landlords often use credit reports to decide among rental applicants. A potential employer may even assess an applicant’s credit report before extending a job offer. Your personal credit score is often used when a creditor is deciding whether or not to extend your business credit.

These creditors will also report to the credit bureaus if you do not pay your bill on time. If you decide to change your cell phone company, cable tv provider, internet provider, change your insurance company, or move to a new apartment, make sure you pay your final bill in full. An unpaid bill will most likely get you a COLLECTION ACCOUNT ON YOUR CREDIT REPORT. Imagine what that looks like to a potential employer or to a lender. That’s why it is so important to remember the rules of the game. Even the small forgotten accounts (like unpaid electric bills) are considered fouls that can get you a penalty, and keep you from scoring!

As a side note on insurance...Most people are shocked when they hear that auto insurers use credit scores in the course of deciding whether to cover drivers and what premium they should be charged.

Why should you have to pay a higher rate for your car insurance because you had unpaid bills or some other financial problems? Some customers who had never had an accident or violation were faced with sharply raised premiums when their renewal notices arrived. In fact, auto insurers are passionate in their belief that credit scores are one of the best predictors of future claims. Statistics also show that most insurance fraud stems from individuals with credit/money problems. According to the American Insurance Association, here are some of the kinds of data from credit reports that are of most interest to insurers

1. Amount of outstanding debt

2. Payment history (any late payments?)

3. Bankruptcies

4. Collections

5. Credit history

6. New applications for credit (number of inquiries on your reports)

Offensive Tip: Remember it is a smart play to notify all creditors if you move. Make sure your creditors always have your most recent address so that you'll receive your billing statements promptly. Also fill out a change of address form at the post office. This will ensure you get your mail forwarded even if some of your creditors didn’t get your new address changed correctly. This also includes temporary address changes or PO Boxes.

Expert Credit Consultants, LLC specializes in establishing business credit and funding using the exclusive Business Credit and Finance Suite as well as credit restoration and optimization. www.ExpertCreditConsultants.com.

What's In Your Credit Report

       - Your name
       - Your address (and previous addresses)
       - Employment (and previous employment)
       - Your current and past loan information
       - Your public record information (court judgments, bankruptcies, liens)
       - A list of other companies who have reviewed your credit.
       - Your 3 digit credit score (optional)

While some of this credit information is self explanatory, some of the other aspects, especially your credit score, are a bit of a mystery to most consumers. Few people know their credit score or understand how it is calculated. Additionally, most people are unclear about how their behavior can affect their scores.

The majority of people understand the basics, like failing to make a payment will make your score go down, but there are a number of complexities that trip up the average consumer. If you pay your debts on time, don’t carry too much debt on any one card, don’t close older accounts unless absolutely necessary and only apply for new credit when you have to, you will generally be in good shape. However, it is important to keep yourself informed so you can maintain a credit score that accurately reflects your consumer status.

Your credit score is determined by an algorithm developed by the Fair Isaac Corporation (hence its other name of FICO score). Since its inception, three corporations, called “credit bureaus” specialize in collecting and reporting on financial history. Those three companies are Equifax, Experian and TransUnion. While the exact formula used to calculate your credit score is a tightly guarded industry secret, these companies provide general guidelines about financial behavior that can affect your credit score. When calculating your score, the basic formula includes:

35 percent: History of on-time or late payments of credit

30 percent: Available credit on your open credit cards

15 percent: The age of your lines of credit (old = good)

10 percent: How often you apply for new credit

10 percent: Variable factors, such as the types of open credit lines you have

Lenders use your credit information from your reports in order to judge your reliability as a loan candidate. Your credit report indicates your ability to handle debt responsibly and will help banks decide if you are a desirable loan customer. A high credit score can help you lock in low APR rates or secure special deals on loans. A bad credit report may prevent you from securing loans and can damage your ability to buy a car, open a credit card or even rent a home. A history of inability to manage your credit successfully will make lenders uncomfortable about trusting you with additional funds in the future.

You are entitled to a free copy of your credit report once a year, an offer you should take advantage of. When you do receive your credit report, check to ensure the figures are accurate and act quickly to correct any mistakes. This may include any clerical errors, identity theft issues or incorrect information. If your credit score is low, you should begin working on a financial rehabilitation plan, either on your own or with a certified debt counselor or credit repair company to begin correcting your bad debt habits.


Expert Credit Consultants, LLC specializes in establishing business credit and funding using our exclusive Business Credit and Finance Suite as well as consumer credit restoration and optimization services. www.ExpertCreditConsultants.

5 Ways to Rebuild Your Personal Credit

Has your credit score taken a hit because of the current recession? Foreclosures, unemployment and other financial struggles have hurt a lot of people's credit history. So how do you go about fixing it? Here are five ways that you can start repairing your credit score:

Organize and prioritize. Your main concern in rebuilding your credit is making sure every bill is paid on time. Sit down with your finances and find places where you can cut corners so that every bill is paid on or before the due date. Set up auto-pay for each credit card so you don't accidentally miss a payment. Your payment history is the largest percentage of your credit score, so it must be perfect going forward if you want to rebuild your credit.

Negotiate down your debt. Many lenders understand that people have financial hardships and will work with you to pay down what you owe, whether it be setting up a payment plan or cutting you a deal if you pay it all at once. Focus on your credit cards, or any other "revolving" debt. Paying off mortgages, auto loans and other "installment" debts don't do as much for your score. Make sure you ask the lender how they will be reporting your new terms to the credit bureaus. They can report them as "Not paying as agreed," which can further hurt your score, or they can report them as "Paying as agreed," which can help your score. Don't agree to any terms that are reported as "not paying as agreed" and make sure to get everything in writing.

Don't close out accounts. It may seem like a good idea to close out your credit card accounts once you pay them off, but doing so can hurt your credit score. One of the main factors of your credit score is your "credit utilization ratio," which measures your credit limit-to-balance ratio on your credit cards. So if you can keep these accounts and manage to maintain a low balance on them, this will help show that you know how to handle your credit.

Get a secured credit card. If your credit score has taken a big hit, it might be impossible for you to be approved for any line of credit. If that's the case, look into getting a secured credit card. With secured cards, you pay an upfront deposit, which in most cases will reflect your credit limit, just in case you have issues paying off your balance. Make sure your secured card reports to all three of the credit bureaus (Experian, Equifax and TransUnion) every month so that you can start building your credit again.

Make sure any mistakes on your credit report are fixed. Check your credit report to make sure there are no mistakes or identity theft-related issues in your credit history. This also includes any negative information on your credit report that can be easily removed. Contest any negative information on your report from any company that no longer exists or has been bought by a larger company. All information on your report must be verified, and if the company isn't there to verify it, it must be removed.

The most important factor in repairing your credit score is time. It takes seven years for most negative information to fall off your report.

Expert Credit Consultants, LLC specializes in establishing business credit and funding using our exclusive Business Credit and Finance Suite as well as consumer credit restoration and optimization. www.ExpertCreditConsultants.com.

How Long Do Negative Items Stay on a Credit Report?

Delinquencies (30 – 180 days): Can remain seven years from the date of the initial missed payment.

Collection accounts: Remain seven years from the date of the initial missed payment that led to the collection (the date of last activity). When a collection account is paid in full, it will be marked “paid collection” on the credit report. If a payment is later made, the new date used to calculate the seven year period starts over with the date the new payment was made.

Charged-off accounts: Remain seven years from the date of the initial missed payment that led to the charge off (the date of last activity). If a payment is later made, the new date used to calculate the seven year period starts over with the date the new payment was made.

Closed accounts: Closed accounts are accounts that are no longer available for further use. Closed accounts may or may not have a zero balance. Closed accounts with delinquencies remain seven years from the date they are reported closed, whether closed by the creditor or by the consumer. Positive closed accounts remain 10 years.

Lost credit card: If there are no delinquencies, credit cards that are reported lost will continue to be listed for two years from the date the card is reported lost. Delinquent payments that occurred before the card was lost are reported for seven years.

Bankruptcy: Chapters 7, 11, and 12 remain for ten years from the filing date. Chapter 13 remains seven years from the filing date. Accounts included in bankruptcy will remain seven years from the date they were reported as included in the bankruptcy.

Child support judgments: Remain seven years from the date the judgment is filed.

Civil and small claim judgments: Remain seven years from the date the judgment is filed.

City, county, state, and federal tax liens: Unpaid tax liens remain on credit reports indefinitely. Paid tax liens remain seven years from the paid date of the lien, although some paid tax liens can be removed earlier.

Inquiries: Most inquiries listed on your credit report are from the past two years. Older inquiries don’t hurt your score as much.

Positive open credit information: remains indefinitely and paid positive accounts remain ten years.

Expert Credit Consultants, LLC specializes in establishing business credit and funding using the exclusive Business Credit and Finance Suite as well as credit restoration and optimization. www.ExpertCreditConsultants.com.