Know Your Credit

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OWN YOUR FINANCIAL REPUTATION
Your credit standing represents your financial reputation within the credit community. Make sure you understand credit reports and scores and where to find them, so that you can maintain the accuracy and integrity of your credit history. It's relatively easy to do, and will help prevent stress and confusion with your next credit application.

Understanding Credit Reports
A credit report, or credit history, is a record of the money you have borrowed and repaid, as well as relevant public records (such as bankruptcy records) and inquiries made to your credit history. Credit reports are maintained and supplied by credit bureaus, which gather personal and financial information about you and how you have handled credit. Individual creditors provide much of this information to credit bureaus and in turn rely on them for data about how credit applicants have handled their debts. As such, it's important to know what's on your credit report and to maintain its accuracy. To obtain a copy of your credit report or dispute information found on your credit report, contact one of the following major credit bureaus:

Equifax Credit Information Services
P.O. Box 740241
Atlanta, GA 30374-0241
(800) 685-1111
www.equifax.com

Experian (formerly TRW Information Services)
National Consumer Assistance Center
P.O. Box 2350
Chatsworth, CA 91313-2350
(888) EXPERIAN or (888) 397-3742
www.experian.com

Trans Union Corporation
Consumer Relations Center
P.O. Box 390
Springfield, PA 19064-0390
(800) 916-8800
www.transunion.com
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Understanding Credit Scores
Credit scores are a method creditors use to determine credit risk. They are typically provided to creditors by one of three major credit bureaus (Equifax, Experian, or Trans Union). Your score is a computer-generated number based on information from your credit report. Your score is then compared to the credit record of people with similar profiles to determine how likely you are to pay off your debt in a timely fashion. Bear in mind, not all creditors rely on credit scores to decide whether or not to approve your application. You can order your credit score from one of the credit bureaus mentioned above or from Fair, Isaac and Company, or FICO® [www.MyFICO.com], the institution which provides credit score formulas to all three major credit bureaus.

According to FICO®, the factors that contribute to your credit score may include:

    Payment history. Have you ever missed or been late on a payment? How much money was owed? How recently did this occur? According to FICO®, this category typically determines about 35% of your credit score.
    Amounts owed. How many accounts have balances? How close are they to the account's credit limit? According to FICO®, this category typically determines about 30% of your credit score.
    Length of credit history. How long have you been building your credit history? How long have your accounts been open? How long has it been since you last used each account? According to FICO®, this category typically determines about 15% of your credit score.
    New credit and credit inquiries. How many recent inquiries and new accounts are on your credit record? How long has it been since the most recent inquiry? According to FICO®, this category typically determines about 10% of your credit score.
    Types of credit use. How many accounts are major credit cards, retail store cards, or installment loans? According to FICO®, this category typically determines about 10% of your credit score.
Visit www.MyFICO.com or the Federal Reserve Board's online Consumer Handbook at www.federalreserve.gov/pubs/consumerhdbk/apply.htm for more detailed information on the factors that can contribute to your credit score and reasons why you may be declined for credit.
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Maintaining an Accurate Credit Record
Your credit file will usually contain your current and former address, marital status, age, social security number, employment history, public record information, credit accounts, and the number of credit inquiries on your record. It is your responsibility to make sure that this information is accurate, especially before you apply for credit.

In order to maintain an accurate credit record, you should review your credit report at least once a year to verify the accuracy of the information provided. You can obtain a copy of your credit report from a company such as Equifax (800-685-1111); Trans Union (800-888-4213); or Experian (888-397-3742). If you see anything inaccurate on the report, contact the bureau which supplied your credit report and ask them to investigate the entry. You are better off catching billing errors before they make it to your credit report. According to AFSAEF's "How to Be Credit Smart," if you feel that a billing error has been made you should:

  1. Write the creditor and explain what you believe to be an error within 60 days after the bill was mailed to you. Date your letter and keep a copy.
  2. Explain why you believe the information is wrong.
  3. Continue to pay for the correct charges on your bill.
If incorrect information does make it onto your record, you must first verify with the creditor that it was a mistake and then contact the credit bureau with notice from the creditor to rectify your credit record. If the first two methods do not resolve the issue you can file a complaint through the Federal Trade Commission (see www.ftc.gov for detailed instructions on filing a complaint).

For more on maintaining an accurate credit record, you can order a free brochure entitled, "How to Be Credit Smart" from www.afsaef.org.
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Guard Against Credit and Identity Theft
Millions of dollars are lost each year due to credit and identity theft. Fortunately, your liability on lost or stolen cards is limited under the Truth in Lending Act. You do not have to pay for any unauthorized charges made after you notify the credit card company of loss or theft of your card. Keep a list of your credit card numbers to make it easier to notify card issuers when your cards are lost or stolen. The most you will have to pay for unauthorized charges is $50 on each card even if someone runs up several hundred dollars worth of charges before you report a card missing.

AFSAEF's "How to Be Credit Smart" recommends the following other safeguards to protect against fraud:

  • Sign your credit card in ink immediately upon receipt and keep it in a safe place.
  • Check to be sure your card is returned to you after you make a purchase at a store.
  • Check the individual amounts and total before paying a credit card bill.
  • Keep receipts so that you can check your monthly statement.
  • If you receive a personalized credit card application in the mail and don't intend to apply, destroy the application.
  • Avoid writing your credit card number on return cards or mailers that can be pulled open easily.
  • Refuse to give your credit card number to a telephone solicitor unless you have initiated the call or you know that the company is a legitimate business.
  • Do not sign a blank charge slip. Draw a line through the lines above the total line.
  • Keep any documents containing sensitive information, including receipts, in a safe place.
  • Select a unique personal identification number (PIN), not an obvious number such as birthday or part of your Social Security number.
For more advice on guarding against or reporting credit or identity fraud visit the Federal Trade Commission's Consumer Information portal at www.ftc.gov/ftc/consumer.htm or order a free copy of "How to Be Credit Smart" from www.afsaef.org.
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