Credit Reports and Scores Unit 6.01
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