How to Improve Your Credit Report

With the economy on go-slow and lenders in a cautious mood, this is the perfect moment to get to know your credit report. It lists your credit accounts, your repayment record and much more – and it can make all the difference between getting the credit card, loan or mortgage you want and a string of puzzling rejections.

Find out what a credit report contains, how it’s used and what you can do to improve it – and your chances of getting the credit you need.

Improve Your Credit Rating: Who has a Credit Report?

If you’re over 18 and have ever taken out a credit card or loan, apart from a student loan, then you have a credit report, which is held securely by a credit reference agency – Experian is the UK’s largest.

Lenders usually check your report when they decide whether to make you an offer and what terms, such as interest rates, to set. It helps them to make informed and responsible decisions.

Improve Your Credit Rating: What does a Credit Report Contain?

As well as listing your credit accounts and showing whether you make repayments on time and in full, your credit report contains a range of information that helps lenders to assess whether you are a reliable borrower and can afford to take out more credit. This data includes details of any court judgments against you for non-payment of debts, plus bankruptcies or individual voluntary arrangements you’ve taken out.

The electoral roll shows if you have registered as a voter at your current address. Lenders check the roll as a precaution against fraud, to make sure that you live where you say you do.

Another section lists the people with whom you share a joint account, such as a credit card or mortgage. These people are known as your financial associates. Their credit report details don’t appear in your report but lenders may look them up separately because their circumstances could affect your ability to repay what you owe.

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Clean up credit score to land a sweet mortgage rate

If you're planning to sell your house in this sluggish housing market, you need to make a good impression. Clean the windows. Wax the floors. Power-wash the cat.

If you're a home buyer, you need to do some housekeeping, too. Unless your credit record is spotless, you probably won't qualify for the lowest mortgage rates.

When you apply for a mortgage, most lenders will review your FICO score, a widely used score developed by Fair Isaac. A few months ago, borrowers with a FICO score of 700 usually qualified for the lowest mortgage rates, says Mavel Vargas, manager of lending research for Informa Research Services. Now, though, most borrowers need a score of at least 720 to get the best rates, she says.

Most borrowers know that falling behind on debts will hurt credit scores. But other issues that could hurt your score may be less obvious, including:

•"Same as cash" offers. These deals, offered on everything from new decks to high-definition TVs, provide a way to postpone having to pay for a large purchase, for anywhere from 90 days to a year. But these offers carry hidden costs for borrowers, says John Ulzheimer, president of educational services for

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Seeking approval New rule for getting a mortgage today: Don't assume anything

But even borrowers who think they're well positioned to be approved for a mortgage "can't assume anything," said Guy Cecala, of Inside Mortgage Finance. And they'd better be prepared to shop around to get the best rates.

Cecala estimates that a third of the people who were able to get a loan in 2005 and 2006 no longer qualify for financing today. That takes into account the disappearance of subprime and Alt-A loans as well as the tightened requirements for getting prime mortgages, he said.

"Mortgage credit is as tight as we've seen it in a generation," said Cecala, publisher of the industry newsletter. "When does it get looser? When people feel that the housing market is stabilized, and that's really not going to happen until we start seeing an end to rising defaults and foreclosures, and housing prices have stabilized in markets throughout the country."

If he had to guess, it'll be another year before getting a mortgage becomes any easier.

In some cases, lenders are even looking beyond the numbers for proof not only that an applicant has a job with a steady income stream but is also likely to keep that job, said Bob Moulton, president of Americana Mortgage Group on Long Island, N.Y.

Case in point: One of his clients, an employee at Bear Stearns, was recently required to get a statement from the human resources department indicating continued probability of employment at the firm. The statement could not be obtained, and the mortgage wasn't approved, he said.

"They're trying to be a lot smarter than they were three, four or five years ago," he said.

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Credit Scores Cost Consumers $28 Billion, Survey Says (Update2)

July 10 (Bloomberg) -- U.S. consumers remain in the dark about how the credit-scoring system works in obtaining mortgages, insurance and credit cards, costing individuals as much as $28 billion each year, a survey concluded.

Credit scores are a vital but often overlooked part of people's financial health. The number, also known as a FICO score, determines interest rates on credit cards, and is being used increasingly by insurance companies to set rates and prospective employers in hiring decisions.

``The good news is they know more about what will affect their scores,'' said Stephen Brobeck, executive director of the Washington- based Consumer Federation of America. ``The bad news is they don't know what their score means.''

Taking steps such as paying bills on time and not maxing out credit cards will improve scores, the Consumer Federation and Washington Mutual Inc. said at a news conference in Washington today.

The survey showed improvement from previous years, with 28 percent correctly identifying 700 as the minimum score to qualify for a prime mortgage rate, up from 24 percent last year. Washington Mutual and the consumer group surveyed more than 1,000 Americans in June, with a margin of error of plus or minus 3 percent.

Saving With Scores

People responding to the survey didn't understand that free credit scores are based on payment histories and how they've used credit in the past. Many respondents said factors such as income, age, marital status, and education levels influence credit scores, the consumer federation said. They don't.

Consumers are assigned credit scores on a scale of 300 to 850, with 700 or above considered prime. Below 600 is considered ``subprime,'' with greater lending risk, as the subprime-mortgage crisis demonstrated.

A low credit score means you'll spend more money to borrow. Raising a credit score by 30 points translates into an annual credit- card finance-charge saving of $105, according to Anthony Vuoto, president of Washington Mutual Card Services. If all consumers raised their scores by that margin, the savings would reach $28 billion, he said.

Scores can also be improved by paying off debts, rather than moving balances between accounts. Paying more than the minimum due on credit cards also improves your FICO score. Missing a single payment by more than 30 days may lower your score by 25 to 50 points, Vuoto said.

The importance of the FICO scores has increased amid the subprime-mortgage meltdown and the ensuing credit crunch. With less money available to lend, many companies have tightened standards, cutting off loans for people with lower numbers.

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Monitoring your credit score is one of the most important things you can do

Americans are identified by certain numbers: age, social security number, income, even a street address. Often these are just numbers, and don't reveal much about identity or history. However, one number which identifies all of us and, unfortunately, many people may not know it: is our credit score. A credit score is the measure of credit risk calculated from a credit report using a standardized formula. A higher credit score compared to a lower credit score indicates to lenders that the person with the higher score is less of a risk when deciding to loan money.
Credit scores most likely will be reviewed by a lender when applying for a car loan or mortgage. What might be surprising is that a credit score may also be reviewed when a person applies for car insurance, inquires about a rental property or even applies for a job. Because credit scores are reviewed for so many different purposes, in some instances without your knowledge, it is a good idea to review both it and your credit history, which is used to determine your credit score, periodically.

Monitoring your credit score and credit history from time to time allows you to monitor any changes and, in the event that false information is included in your credit history, have the false information stricken from your record. The Fair Credit Reporting Act requires each of the nationwide consumer reporting companies - Equifax, Experian, and TransUnion - to provide you with a free copy of your credit report, at your request, once every 12 months. To request your report online go to www.annualcreditreport.com or link to that website from the Federal Trade Commission's website, www.ftc.gov.
If, after reviewing your credit history, you believe that someone has obtained credit using your stolen identity or, if you lost your wallet and you think someone may use the information to steal your identity, you may wish to subscribe to a credit monitoring service. This service may provide you access to your credit score, provide you notice when credit is applied for using your personal information and has the ability to "lock" your credit so no one can obtain new credit (including you until you "unlock" your credit).

You may be eligible to receive credit monitoring services for a limited time at no cost. Recently, TransUnion agreed, as a part of a preliminary lawsuit settlement, to offer free credit monitoring to those individuals who had an open credit account or open line of credit from any lender from January 1, 1987, to May 28, 2008. This group includes those individuals who had a credit card, car loan, mortgage, student loan or any other loan. The lawsuit claims that TransUnion violated the Fair Credit Reporting Act by selling lists with consumers' personal and financial information for marketing purposes, a practice which TransUnion has discontinued. For more details about the preliminary settlement, and to select one of the several settlement options listed in Summary Notice, visit www.listclassaction.com or call 1-866-416-3470.

As your credit score affects most financial aspects of your life, knowing what it is and, possibility monitoring it, may help you save money when you buy your home or obtain insurance. You may want to consider taking advantage of the opportunity to receive a free credit report, and for some, free monitoring services.
The advice in this column is general in nature. Consult your attorney for legal guidance to fit your particular situation.

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BBB advises Mississippians to use credit reports wisely

Everyone is aware that bad credit can affect your ability to obtain additional credit.

But not everyone is aware that it can also affect your ability to get or keep a job.

Employers often use a credit report when hiring or evaluating employees for promotion, reassignment or retention.

“Under the Fair Credit Report Act (FCRA), an employer must get permission to look at an individual's credit report,” said Bill Moak, President/CEO of the Better Business Bureau (BBB) of Mississippi.

“Additionally, if bad credit is the basis for an employer failing to hire someone, the employer must show them their credit report.”

The BBB urges all consumers to obtain a credit report annually. The reporting companies - Equifax, Experian, and TransUnion - are required to provide consumers with a free credit report, upon request, once every 12 months.

The three ways to request these reports are:
# Call toll-free 877-322-8228
# Mail to Annual Credit Report Request Service, P O Box 105281 Atlanta, GA 30348-5281.

According to the FCRA, both the reporting company and the information provider are responsible for correcting inaccurate or incomplete information on individual reports.

Therefore, to protect rights, the BBB advises consumers to contact both entities when disputing any information on their reports.

The BBB mission is to promote the highest ethical marketplace relationship between businesses and the public through self-regulation, education and information.

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