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Credit is so important...NOW MORE THAN EVER!!! (Part 2 of 2)

By
Real Estate Broker/Owner with Team Orshoff - All things Riverside Real Estate

This is part 2 

The lending guidelines are changing daily.  The best thing that anyone can do is focus on maintaining, and improving their credit.  By understanding your rights and responsibilities regarding your credit report and your relationship to companies that grant you credit, you can ensure that you will be treated fairly, and the information contained in your credit report is accurate. Here are some frequently-asked questions regarding credit reports and credit scores...a sort of Credit 101.

Can I see my credit report?

Through a recently-enacted federal law, you can now receive one free copy of your credit report from each of the three credit reporting bureaus once each year. To access your free credit report, go to http://www.annualcreditreport.com/.

If you have been the victim of identity theft, or you suspect you are a victim, you are also entitled to review your report at no charge more frequently than once each year. For information about your rights as an identity theft victim visit the Web site of the Federal Trade Commission at www.ftc.gov/idtheft.

What should I do if I see an error in my credit report?

If you spot what you believe to be an error in your report you should take immediate action. Under federal law you have the right to dispute what you believe to be inaccurate credit reporting data. The Federal Trade Commission's Web site offers a free report entitled "How to Dispute Credit Errors." You can download this report at www.ftc.gov/bcp/conline/edcams/credit/coninfo_reports.htm.

It's possible that the credit reporting error is the result of someone assuming your identity for fraudulent purposes. In this case you are afforded certain protections under the law, including the right to place an "alert" on your file that would prevent credit grantors from opening a new line of credit under your name unless they validate your identity. For more information about your rights as a possible victim of identity theft, visit the FTC's Web site at www.ftc.gov/idtheft.

Who else can see my credit report?

There are strict laws governing who can see the information in your credit report. Generally, access to your report is limited to anyone who will be making an offer of credit (such as a loan or revolving line of credit), a prospective employer, insurance provider or landlord.

The law also permits credit grantors with whom you have no existing relationship to access your file only if the access results in their extending you a firm offer of credit, such as credit card or a loan. You may opt out of this use by notifying the credit bureaus that you do not want your credit profile used for these kinds of inquiries and solicitations.

By law, every time a company or individual accesses your credit profile their access must be recorded, and this information must be made available to you when you request access to your own report.

How does my credit report affect my ability to get a loan?

Credit grantors (also known as lenders) may consider a number of factors before they approve you for credit, including the information contained in your credit file. This information tells credit grantors how well you have managed your credit with other companies.

Credit grantors may also consider a number of factors not contained in your credit report, such as your income, the value of assets you own such as homes, automobiles and balances in your checking and savings account.

Thus, while your credit report may be reviewed when you apply for credit, it is not always the sole source of information used to approve or deny credit.

What is a FICO score?

FICO® is an abbreviation for Fair Isaac and Company, which pioneered the development of credit scoring models for credit grantors. There are many types of credit scores in use today, some of which incorporate rules and methods developed by Fair Isaac; others developed by third-party companies or by credit grantors themselves. The FICO score is one of the most recognized scores and it is often used by credit grantors in their decision process.

The FICO score attempts to summarize in a single number and at a particular point in time the level of credit risk associated with a particular consumer. FICO scores range from 300 to 900, with higher scores being associated with low credit risk.

For a complete explanation of FICO scores and how they are created and used, visit the Fair Isaac Web site located at http://www.myfico.com/.

How is a FICO score or other credit score calculated?

Credit scores are developed using rigorous mathematical models that study the relationships between the credit profiles of consumers and their willingness and ability to repay credit. This analysis can involve hundreds of thousands or millions of credit profiles to ensure that the factors involved legitimately predict future credit behavior.

It's important to note that the information used to calculate a credit score changes frequently; as a result, a credit score changes from day to day based upon the current data contained in an individual's credit report. The fact that you have a low score in one month does not necessarily dictate that your score will be as low the next month.

There are numerous Web sites available to help you understand how credit scores are calculated and used. We recommend the following sites:

Fair Isaac and Company, located at http://www.myfico.com/

Experian, located at http://www.experian.com/

Equifax, located at http://www.econsumer.equifax.com/

Trans Union, located at http://www.truecredit.com/

FICO and Fair Issac and Company are trademarks or registered trademarks of Fair Isaac Corporation in the United States and/or in other countries.

Darren Orshoff, a Mortgage and Investment Planner with Wholesale Mortgage Source, a mortgage brokerage company based in Temecula, CaliforniaOrshoff also hosts The Home Ownership Roundtable, a weekly educational radio show on CBS Radio providing insight and direction to anything related to real estate finance and investment.  His other on-demand radio show, The R.E.F.I. Hour, provides the same kind of insights through interview and commentary.

If you would like to receive my weekly or monthly newsletter with great tidbits of info like this click here to email me with the subject "please add me to your mailing list."  You can always tune in Darren Orshoff every week on 97.1 FREE FM as I talk about everything real estate finance and investment on The Home Ownership Roundtable.

For information on anything real estate finance and investment, contact Orshoff at 888-823-2261 or visit http://ieloanguy.com/

TUNE IN EVERY SATURDAY AT 1pm PST STREAMING ONLINE AT http://www.971roundtable.com/

Susan Trombley
Trombley Real Estate - Wake Forest, NC
Broker/Realtor, Raleigh, Cary, Wake Forest, Youngs
And now even credit cards are offering that as a free service to you by asking them to run your report for you. Amazing what is happening out there these days.
Sep 08, 2007 04:22 AM
Robert Caillier
Global Housing Services LLC - Mound, MN
Global Housing Services, Home Loans, Low Rates, Financing,

So....when do you suppose this will become cirriculum in our public schools? 

You would think that those in control of the content our children are exposed to might see the value in a general (or even highly detailed) education surrounding credit and it's pitfalls.  Most of our children know (by all too young of an age) the function of a credit card (to buy things), but have no idea the real life implications of being granted that credit.

If our educational system balks here...we as parents MUST inform our next generation of smarter ways to budget their incomes.

Sep 08, 2007 04:22 AM
John Thomas
Primary Residential Mortgage Inc. - Newark, DE
First Time Home Buyer Expert

Great credit info, I am going to add some of it to my credit presentation.

Thanks, John Thomas

Sep 08, 2007 09:01 AM
Darren Orshoff
Team Orshoff - All things Riverside Real Estate - Riverside, CA
The Key To Your Home™
John...don't be shy...share your presentation!  :)
Sep 08, 2007 10:45 AM
John Occhi
AZ Veteran Notary Services - Marana, AZ
Mobile Notary Public/Certified Loan Signing Agent

Darren, thanks again for this info, it is really very good - well organized and presented.  I'm with you though, I'd like to see John's presentation...

John

Sep 10, 2007 03:57 PM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel
Thanks for the information. Good credit is going to be more important now because of sub prime problems.
Sep 10, 2007 11:02 PM