Credit Reports and Scores Unit 6.01

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Collection Agencies

Businesses hired by lenders to pursue payments on debts not paid back according to contract terms

Credit

Goods, services, and/or money received in exchange for a promise to pay back a definite sum of money at a future date

Positive Credit History =

Higher Credit Score

Tax liens

Taxes not paid in full

Credit History

Record of the borrower's past loan and credit-related transactions

Credit Reports

Record, created by a CRA, of an individual's credit history

Strategies to Build Credit

- Acquire and positively manage small lines of credit - Small closed-end loan, credit card with co-signer, secured credit card, and authorized user on credit card

Closed-end credit

- Borrower must repay the amount in a specified number of equal payments - Total amount of loan

Information in a Credit Report

- Consumer (personal information) - Credit account Information - Public Record Information - Inquiry Information

Types of Lenders Who Report to CRA's

- Depository institutions, Credit card companies, Mortgage and finance companies, and Retail stores that offer credit accounts - Lenders usually report all information

Open-end credit

- Extended as a line of credit established in advance - Credit limit (maximum dollar amount that can be borrowed)

Consumer (personal information)

- Information provided to lenders when applying for credit - Name, Current and previous addresses, Telephone number, Full or partial social security number, Date of birth, Employment history

Credit History affects more than credit

- Insurance rate goes up the lower the credit score is - Employment - Public Utility Services - Housing

Types of Data Furnishers Who Report to CRA's

- Landlords, Cell phone companies, Medical providers, and Utility accounts - Only report when money is owed to them

Information not in a Credit Report

- Medical information about where the person was treated and for what - Race and Gender - Religion and Nationality - Non-credit depository institution accounts - Criminal backround - Buying habits

Positive Credit History

- Pay your bills consistently and on time - Maintain reasonable amounts of available credit - Apply for credit sparingly - Have a mix of different types of accounts - Do not have too many of one type of account - Check your credit report annually

Credit Score

- Reflects information in the entire credit report - Numeric "grade" of a consumer's financial reliability - At a particular point in time

Inquiry Information

- Requests for an individual's credit report - Credit is pulled

Credit Account Information

- Specific information about each credit account you have or have had - Type of credit, Loan Amount or Credit Limit, Date, Account Balance, Payment Information

Lender

A person or organization who makes funds available for others to borrow

Where do you check your credit report?

Annualcreditreport.com

Closed-end credit examples

Automobile loans, Education loans, and Mortgages

Open-end credit features

Borrower chooses how much to pay

Foreclosure

Borrower fails to keep up with mortgage payments and the lender takes possession of the property

Types of Credit

Closed-end credit and Open-end credit

Open-end credit examples

Credit cards

Three US Credit Reporting Agencies

Equifax, Experian, TransUnion

Public Records

Information from federal, state and county public court records

Credit Reporting Agencies (CRA)

Keep a record of a consumer's account history (credit history)

Credit Score Definition

Mathematical number created to help a lender evaluate the risk associated with lending a consumer money

Credit Repair Agencies

Offer to help a consumer "fix" his/her negative credit report

When should you check your credit report?

Once a year (annually)

Borrower

Someone who receives something with a promise to return it or to repay what is borrowed

Closed-end credit features

Usually has a contract outlining repayment terms

Bankruptcy

When an individual or business is not able to repay outstanding debts


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