Credit Reporting 101

Let's take on the fundamentals of the credit reporting system. From the big three credit bureaus, TransUnion, Equifax and Experian, to your rights under the Fair Credit Reporting Act, this article will help you navigate the credit report maze.

The credit reporting agencies - TransUnion, Equifax and Experian (formerly TRW) are the three national credit reporting agencies that keep records on consumers. The reporting agencies work with lenders, creditors, insurers and employers to update and distribute your information to the appropriate institutions. Here's an example of how the system works:

1. When you apply for a new credit card the creditor requests a copy of your financial history from the reporting agencies. This causes a "hard inquiry" to be recorded on your credit report.

2. The creditor uses your credit reports and scores along with income and debt information to determine what rates to offer.

3. You start to use the new credit card and the creditor reports your activities to the credit reporting agencies about every 30 days.

4. The credit reporting agencies update your credit report as they receive new information from creditors or lenders.

5. Your credit profile changes based on your financial activity. The next time you apply for a credit card or loan, the process repeats.

Your credit report - Your credit report is divided into six main sections: consumer information (address, birthday and employment), consumer statement, account histories, public records, inquiries and creditor contacts. When you open a new account, miss a payment or move, these sections are updated with new information. Old negative records will stay on your credit report for 7-10 years. Positive records can remain on your credit report longer. Not all creditors report to all three agencies and the agencies obtain their data independently so your reports from TransUnion, Equifax and Experian could be substantially different from each other. That's why it's important to check your three credit reports every 6-12 months to ensure that the information is accurate and up-to-date.

Correcting inaccuracies - Under the Fair Credit Reporting Act, consumers are protected from having inaccurate information on their credit reports. If you find an inaccurate record on your report, try contacting the creditor or lender associated with the mark first. These companies can usually correct the mistake and send an update to the credit reporting agencies. If you can't make progress this way, you can also dispute the inaccuracy directly with the credit reporting agencies.

Working the system - Managing your credit and maintaing a good credit history can lead to better rates on major purchases. We recommend that you check your credit reports every 6-12 months or at least 3 months before a major purchase in order to guard against damaging inaccuracies and identity theft. Routine check-ups along with paying your bills on time, keeping your credit card balances below 35% of their limits and correcting any negative inaccuracies will help you maintain a healthy credit profile.

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Financial tips for couples

Across the country there are thousands of cheerful couples saying "I do" to a lifetime of love and dedication. You have to wonder how many of these brides and grooms are aware that they could also be saying "I do" to hefty mortgage payments and troubled credit reports. Understanding the financial commitments that come with marriage can help to maintain marital bliss long after the ceremony. Here's what you need to know:

1. Talk About It - Openly discussing your finances with your fiancé is the best way to prevent future disagreements. Talk about your spending habits, your savings and your financial goals so that you will both be on the same page. Develop a plan for managing your money after the wedding. Will you open joint accounts? How much do you want to save each month? Work together to create a money management strategy that fits your needs.

2. Wedding Expenses - Planning the wedding of your dreams can sometimes lead to a nightmare of debt. The average wedding now costs $22,000, according to the Condé Nast Bridal Infobank, a hefty sum that can lead to big credit card bills after the honeymoon ends. Talk with your fiancé about how much you can afford to spend without breaking the bank. Be creative about cutting back your budget: using potted flowers and making the invitations yourself can help you shrink your costs without reducing your style.

3. Credit - Understanding your sweetheart's credit history can help you avoid future surprises. Your fiancé's credit could have a dramatic impact on your rates for co-signed loans and joint accounts in the future. If there are past credit problems, work together to clean things up and reduce debts. Starting your new life together could be a lot smoother with good credit.

4. Joint Accounts - Don't worry, your credit reports won't automatically merge together when you get married. Only when you open a joint account, become an authorized user or co-sign on a loan will a record appear on both your credit reports. Combining your finances this way can be a great way to get the best deal on a major purchase. Be careful though, any negative reporting associated with the account could mean double damage.

5. Love Nest - If you are planning on buying a home together, give yourselves at least six months to save up a down payment and reduce your debt-to-income ratio. A few months of financial improvement can help you save thousands on your mortgage.

6. Stay Focused - Above all else, don't let money problems come in the way of your love for each other. Talk honestly about your financial concerns and work together to get through the hard times. Your relationship is far more valuable than anything money can buy.

For more information contact Mark Bustamonte at 954-707-2932 or visit

Financial Education Services (FES) and FES Protection Plan

Don't Let Medical Bills Ruin Your Credit

Medical bills are the leading cause of bankruptcy according to many financial sources. Unfortunately, many people neglect their medical bills without realizing the impact that those unpaid bills could have on their credit score.

How Medical Bills Can Hurt Your Credit

After you receive medical services, your physician or hospital will bill you for any portion that wasn't covered by insurance. Just like any other bill, medical bills have a due date. If you don't pay by the due date, your bill becomes past due. Hospitals will only send you so many past due notices before they give your account to a third-party debt collector to resume collection efforts.

When the debt collector receives your medical bill, one of the first things it will do is report the account to one or all of the three major credit bureaus (Equifax, Experian, and TransUnion). The medical collection account is considered a serious delinquency and can remain on your credit report for up to seven years, the maximum amount of time permitted by law.

Your credit score - the number creditors and lenders often use to approve your applications for new loans and credit - is based solely on information that's in your credit report. Since having a collection account on your credit report indicates you have a seriously delinquency in your credit history, your credit score will drop when a new collection is added to your credit report. The more medical collections accounts you have, the lower your credit score will be.

Protect Your Credit from Medical Bills

One of the easiest ways to keep medical bills from impacting your credit score is to pay your bills when you receive them. If you can't afford to make payment in full, contact the hospital's billing department to make payment arrangements.

Even if you have health insurance, don't assume that your insurance company will always handle bills in a timely manner. If you receive a bill that should have been covered by insurance, contact your insurance company to find out why the bill wasn't paid. It could have been a simple oversight by hospital billing or the insurance claims department. Insurance companies often cover only a certain percentage of medical bills, so you might be responsible for some portion of medical debt after the insurance company has covered its part.

To find out whether you have unpaid medical bills out there, check your credit report.

To be doubly safe, you might contact the hospital or physician's billing department to check the status of your account, especially if you've received any medical services within the past year. Sometimes, just because the medical bills aren't on your credit report doesn't mean they don't exist. By contacting the medical provider, you'll know for sure whether you have outstanding medical bills that could end up hurting your credit.

For more information contact Mark Bustamonte at 954-707-2932 or visit

Financial Education Services (FES) and FES Protection Plan

What is the definition of accurate information?

This is the $64 question. The Yale University School of Law put together an excellent publication that states, "Consumer reporting agencies must correct or delete inaccurate, incomplete or unverifiable information..."

http://www.yale.edu/hronline/careers/screening/documents/FairCreditReportingAct.pdf This is the first key to understanding what information can be placed on your credit report and which party bears the burden of proof. There are volumes of case law on this subject, but don't expect to see the credit bureaus placed in a negative light when looking for this definition on their websites. This would be like the IRS providing you with a guide on how to fool the tax auditor.

Consumers don't really know what should and should not be on their credit reports and hence, don't have the basis to challenge the information it contains. Look at the class action law suit filed at www.bankruptcydischargesettlement.com. This law suit alleges that bankruptcy debts in particular were manipulated to bring down credit scores more than they would be from the bankruptcy itself. There is a clear advantage to banks and insurance companies who profit from charging higher rates and fees to this class of consumer.

The process of identifying "inaccurate, incomplete, and unverifiable" information is best accomplished by someone who knows exactly what information is being reported. Many times, there can be something as simple as the opening date of the account that is wrong. Be definition, this is inaccurate. If the last activity date is unknown, this is incomplete. If the current balance on a loan cannot be verified, then that information is unverifiable. There are numerous other pieces of data that all fall under this same category.

Are banks the only ones looking at my FICO score, and do they have to pay the same fee I do?

No and no. The sites show a scale of interest rates for different types of loans, but did you know that your insurance agent also uses an insurance score to help determine your premiums? The Fair Isaac Company developed the first insurance scoring model in 1998 and there have been some updates since then. Concrete information on this subject is very sketchy, but my personal insurance agent told me that home owners' policies cost up to 40% more if your credit is in the toilet, but vehicle insurance premiums more than double with bottom-of-the-barrel credit scores. I asked if I could get a table with this information and was told that I couldn't. Farmer's Insurance is not using the FICO score specifically, but they do have a score-based model that uses credit report data.

Employers are relying more on credit scores for hiring decisions and for promotions, but it doesn't stop there. Many utility companies will require a deposit prior to connecting service and some are using your credit score to determine your kilowatt/hour RATE! Just imagine, you might be paying more for electricity soon based on a low credit score.

I'm sure that no one is surprised to find that banks and insurance companies pay a fraction of what you pay to get the same information. On Myfico.com you will pay $15.95 to get FICO Standard, which only provides scores and bureau information for Equifax and Trans Union. Due to an on-going law suit between Fair Isaac and Experian, you cannot purchase your Experian FICO score at Myfico.com. As a national mortgage lender, we can purchase all three FICO scores with the matching bureaus for $9.86. I'm sure the big banks get an even better discount.

Which institutions are already using FICO ’08, and how much will the new version lower my score?

The "selling point" of FICO '08 is broad based. The Fair Isaac Company said, "The strongest improvements in risk prediction over current FICO scores are achieved in key consumer segments such as those opening new accounts or having prior derogatory information. In addition, this newest generation of FICO scores includes refinements to help lenders better evaluate consumers who are comparatively new to credit." Fine, but what does that mean?

A webinar put on by the company in September of 2009 allowed for some interesting interchange. We were told that people with very high scores would be unaffected, but those in the lower ranges could expect to see their scores drop by as much as 10 to 30 points. That statistic is NOT published anywhere, lest you go looking for it. The new version would also identify authorized user accounts that had been set up for the sole purpose of creating the appearance of a long-established trade line. We were told that collection accounts less than $100 would not affect the score, nor would an isolated late payment if the consumer had an otherwise stellar payment history.

There are 5 things that can affect your FICO Scores

1) Payment History. This has the biggest effect on your FICO scores. It accounts for 35% of your score. Paying a debt n time and in full has a positive impact. Late payments, judgments and charge-offs have a negative effect. You should know that if you make a late payment your FICO score WILL go down.

2) Outstanding Balances. This has a 30% effect on your credit scores. The debt ratio or outstanding balance to available credit is important. Keeping that below 50% will help you credit scores. Keeping it below 30% will raise you credit score even more.

3) Length of credit has a 15% impact on your FICO scores. The longer the time that a credit line is open will help your credit scores go up. It is never a good idea to close an account today. Opening new credit cards will decrease the average length, and therefore hurt your credit score.

4) Type of Credit. This has a 10% impact on your credit score. It's good to have a mix of installment loans like car and furniture loans, home loans, and credit card loans.

5) Inquiries. Inquiries have a 10% impact on your credit score. Hard inquiries for credit have a negative impact on your credit score. Each hard inquiry can cost 2 - 50 points on a credit score. Inquiries stay on your credit for up to one year even though you may not see them after 90 days..

Financial Empowerment Network Team and Prime Financial Credit Services

New Rules Issued by the Federal Reserve and Federal Trade Commission about Consumer Credit

Consumers taking out auto, home mortgages, credit cards and other types of loans will be notified when they are offtered an interest rate that is higher than is customary due to their poor credit histories. This is under new rules issued on 12/23/09 than become effective on Jan., 1 2011.

Lenders traditionally offer borrowers rate and terms based on their credit reports, which reflects the borrowers' ability to repay the loans. This is called "risk-based pricing."

The new rules set forth by the Federal Reserve and the Federal Trade Commission entitle borrowers who receive pricing notifications to also be entitled to a free credit report to check the accuracy of their credit report.

Borrowers will be notified about the higher interest rates "after the terms of credit have been set, but before the consumer becomes contractually obligated on the credit transaction," according to the rules.

This notification is required when the lender - based on the borrowers' credit report - offers credit terms "that are materially less favorable" than the terms offered or provided to other consumers, the regulators said.

Lenders will not have to provide this notification if they offer borrowers a free credit score, Federal Reserve attorneys explained. A consumer must normally pay a fee - between $8-$11 - to obtain their credit scores, the attorney said. Credit reports don't contain credit scores, they said.

This provision, announced yesterday, is aimed at helping borrowers better understand the rates they are being offered on particular loans and to get more information about their credit reports.

Keith Dienstl is a member of the Financial Empowerment Network Team and Prime Financial Credit Services you can also visit Credit Repair Services for more information on Keith Dienstl.

Understanding Your Credit Report

A credit report contains all your information that is reported to the three credit bureaus. The three credit bureaus are Experian located in Chester, PA; Equifax located in Atlanta, GA; and Equifax located in Allen, TX. The information reported to the credit bureaus is your payment history that contains the following information:

Personal Information - the personal information on the credit report lists the basic information about the individual. None of the information listed in the personal information effects the credit score calculation. The personal information on the credit report contains any name used, birth name, AKA or any name the creditor has used when applying for credit. The date of birth, current and previous address, employment history, and the dates the information was reported are also listed, credit report.

Summary - the summary section of the credit report contains a categorized list of all the accounts on the credit report. This synopsis allows the viewer a quick review of the credit report and compares the data that is reported to the three credit bureaus.

Account History - The account history on the credit report contains all the account a person has open or closed. This section has credit history of your payments. Each of the account will contain: Account Number, Account Type, Creditor Name, Monthly Payment, Highest Balance Owed, Credit Limit or Loan Amount, Date Open or Closed, Payment History, and if it is a joint or individual account.

Inquires - the credit report contains two types of inquires. The first type of inquire on the credit report is inquires where a business pulled the credit and the second type is when an individual applies for credit. When you apply for credit it remains on your credit report for two years. When you show a history of declined credit applications it makes you look desperate. More than likely a lender will not loan money to a desperate person. Multiple approved applications send a different message. When you're approved for a loan or a line of credit, the lender has made a commitment to loan you the funds. Your ability to repay these lines of credit and loans depends on your income. Your capacity to take on additional debt is diminished by the amount of debt or potential debt outstanding.

Public record information - Public records on a credit report may include information such as judgments, foreclosures, lawsuits, wage attachments, bankruptcies, state and federal tax liens, and past-due child support. This information is reported by county, state, and federal courts to a variety of credit reporting agencies. The agencies retain the information in a credit report and use the information along with other pertinent credit data to determine your credit score. Since public records reflect poorly on your credit rating, you'll want to make sure that this section of your report stays spotless. This information will remain on your credit report for seven years. However, if the record relates to bankruptcy, it will remain on your report for 10 years.

I am a member of the Financial Empowerment Network Team and Prime Financial Credit Services

Your Credit Score Is Yours to Control

Are you confused by credit, and how to create a better credit score? Don't feel bad, many consumers and business people find it hard to understand why their credit score is low. They pay their bills. And when they are a little late on a payment, they pay extra fees to the Lenders to make up for that. The Lenders enjoy great profits, and yet, the Borrower gets penalized more. Is it fair? I say NO! Enough! It's time for us to take control of our credit scores, and get them to reflect accurately, what kind of people we really are. In fact, the United States government agrees. Toady, there are laws to protect us, and allow us to take back control of our credit histories and credit scores.

Use these laws to make sure you aren't forced to pay more for auto loans, credit cards, mortgages, insurance and utilities. Besides costing you more money in monthly bills, we've been hearing more about people who get job offers that are later taken back, because of a "bad" credit score, a result of having been out of work for a year or longer. They didn't use credit to support a luxurious lifestyle. Ironically, they are penalized by taking away the very thing that they need to get back on their feet and to get back to paying their bills. Is it just me, or does it seem ridiculous to you as well? Credit reporting agencies, and Lenders, seem to believe that it's their right to penalize consumers to any level that they choose. The US government says it isn't their right. It is their right to report late payments and defaults on payment agreements, to the extent that they report it accurately. Is the information on your credit report accurate?

Frits Tessers is a member of the Financial Empowerment Network Team and Prime Financial Credit Services
you can also visit Personal Coaching for more information on Frits Tessers.