What is "Credit"?

Where does credit information come from?
Your credit information is provided by credit grantors, including credit card companies, auto and home lenders, and retail stores. It also includes data from court records, such as bankruptcy filings, tax liens, and judgments.

What is a credit score?
A credit score is a number that reflects your likelihood of repaying borrowed credit. Scores range from 350 to 850. It is generated through a proprietary model developed by Fair, Isaac & Company (FICO®), which evaluates various factors in your credit report to determine the score.

What factors contribute to the credit score?
Your score is based on factors like your payment history (on-time or late), the age of your accounts, your credit utilization (balance relative to the limit), the number of open accounts, and any collection records, bankruptcies, judgments, or liens.

Why does a credit score vary between between reports?
Scores on credit reports from bureaus reflect personal credit scores, while mortgage lenders use specific models to generate a mortgage score, which may differ. Different industries (like auto or credit cards) use distinct scoring models, so scores can vary across different reports.

How long do accounts stay on the credit report?

• Accounts in good standing: Up to 10 years.

• Accounts in default or missed payments: Up to 7 years.

• Collection accounts: 7 years from the original date.

• Public records:

  • Chapter 7 & 11 bankruptcies: 10 years from filing date.

  • Chapter 13 bankruptcies: 7 years from filing.

  • Unpaid tax liens: Indefinitely.

  • Paid tax liens & judgments: Up to 7 years.

Why do the credit bureaus sometimes have different information?
Creditors aren't required to report to all three bureaus. Some report to just one or two. Additionally, the bureaus may receive information based on geographical proximity, so data can differ from one report to the next.

What if the balance on a credit report is incorrect?
Balances may not reflect recent payments, as creditors report periodically. If a reported balance was correct when it was filed, it doesn’t need to be disputed. The correct balance will show up after the next update from the creditor.

A credit score is lower than expected despite paying bills on time. Why is that?
Factors such as high credit card balances relative to your limit, too many revolving accounts, or newly opened credit can negatively impact your score. It's recommended to keep your balance below 30% of your limit and limit new credit applications.

How to remove accounts listed under a ex-spouse’s name from a credit report?
A divorce decree does not release you from responsibility for debts unless the creditor agrees. You must contact each creditor directly to request that your name be removed from the account.

How to start building credit when a person has none or only negative credit?
Look at ways to increase available credit. That may be through a secured or unsecured credit card.

Is it best to pay the collection agency or the original creditor for a collection account?
Always contact the collection agency first to negotiate a settlement. If the original creditor no longer handles the debt, request a letter confirming they’ll remove the account from your credit report once it's settled.

Will paying off a collection account remove it from a credit report?
Paying off a collection will not remove it from your report. It remains for 7 years unless it was reported in error.

What if the collection agency on my report is out of business?
If the collection agency is no longer in business, dispute the entry with the credit bureaus. If they confirm the agency is out of business, the entry will be removed from your report.

What should I do if there are debts on my credit report that don’t belong to me?
Contact the creditor and the credit bureaus immediately. If someone else's information is mixed with yours, you may be a victim of fraud or identity theft.

What if there are unauthorized inquiries on a credit report?
If you notice an inquiry you didn’t authorize, contact the company directly for clarification. If it was unauthorized, you can dispute it with the credit bureau.

Why is my credit report mixed with someone else’s?
The bureaus use more than just your Social Security number to match files, such as names and addresses. If your information is mixed with someone else’s, contact the bureaus to correct it.

How can I protect myself from credit fraud or identity theft?
Order your credit report yearly from each bureau and review it for errors. You can also place a fraud alert on your file.

Tips to prevent fraud:

• Use initials on your checks instead of your full first name.

• Avoid writing full credit card numbers on checks.

• Use a work phone number and PO Box on checks if possible.

• Make copies of your important documents (credit cards, ID, passport) and store them safely.

If your credit cards are stolen, cancel them immediately, file a police report, and contact the credit bureaus to place a fraud alert on your file.

How can I improve credit score?
Follow these basic steps to improve your credit:

• Pay your bills on time.

• Keep balances low on revolving accounts.

• Only apply for new credit when necessary.

If you want to know about other strategies, give Steve a call @ 503-753-7015