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ESTABLISHING CREDIT

The interest rate on your loan will depend on your credit history. The following steps will help you establish good credit.

  • Pay your bills on time
  • Establish regular savings
  • Maintain a checking account without overdrafts
  • Review your credit report at least once a year to determine if there are errors or unpaid debts.

WHAT MAKES UP MY CREDIT SCORE?

The credit score used by most lenders is the Fair Isaac Corporation (FICO) score. Your FICO score is a number that ranges from a low of 300 to a high of 850. Members with high scores get more favorable interest rates and easier access to credit; members with low scores may pay high interest rates or be denied credit.

Lenders use your credit score to predict risk (the likelihood you will become seriously delinquent on your credit obligations).

  • Payment history is 35% of your score.
  • Capacity (the amount of available credit on revolving accounts) is 30% of your score.
  • The age of your accounts is 15% of your score.
  • Debt accumulated in the last 12-18 months is 10% of your score.
  • The mix of credit is 10% of your score.

ACTIONS THAT CAN HURT YOUR CREDIT SCORE

  • Missing a single payment can drop your score 50-70 points. If you miss payments frequently or are several payments past due you may be penalized more severely.
  • Maxed out credit cards may reduce your score by as much as 100 points.
  • Closing an old account can lower your score by up to 150 points because there is less credit available.
  • Shopping for credit excessively. Every time you fill out a credit application you are giving the lender the opportunity to access your credit report, increasing the number of inquiries.
  • Opening multiple new credit cards or loans in a short period of time.
  • Using only revolving loans, such as credit cards.
  • “Settling” with a lender for less than the full amount owed

WHO HAS ACCESS TO MY CREDIT REPORT?

  • Creditors
  • Employers
  • Government Agencies
  • Judgement Creditors
  • Landlords and Mortgage Holders
  • Utility and Insurance Companies

WHAT'S ON MY CREDIT REPORT?

  • Identification and employment information, including name, date of birth, social security number, name of employer and spouse’s name.
  • Public record information which includes bankruptcies, foreclosures, tax liens and judgments.
  • Payment history showing how much credit has been extended and the payment history.
  • Collection agency activity.
  • Inquiries of all creditors who have requested your credit report in the last 2 years. There will also be a record of individuals or businesses that requested your credit history for employment purposes in the last 2 years.

WHAT'S NOT ON MY CREDIT REPORT?

  • Medical history and records
  • Consumer buying habits
  • Checking and Savings account information
  • Income and asset information

HOW LONG IS INFORMATION STORED ON MY CREDIT REPORT?

  • Good information is stored for 10 years from the date the account was closed.
  • Adverse information is stored for 7 years from the date of the first delinquency.
  • Public record information is stored as follows:
    • Tax Liens – 7 years from the date paid
    • Unpaid Tax Liens – indefinitely
    • Judgments – 7 years from the date filed
    • Bankruptcy Chapter 7 – 10 years from the filing date
    • Bankruptcy Chapter 13 – 7 years from the filing date

HOW CAN I GET A FREE COPY OF MY CREDIT REPORT?

The FCRA (Fair Disclosure Rule) requires each of the nationwide credit reporting agencies (Equifax, Experian and Trans Union) to provide a free copy of your credit report upon request once every 12 months. You do not have to pull a report from each agency at the same time. Stagger when you pull these reports so you can stay on top of your credit history 3 times a year. You may obtain your free credit report at www.annualcreditreport.com

HOW CAN I DISPUTE INACCURATE INFORMATION IN MY CREDIT REPORT?

If you find an error in your credit report, send a letter to the credit reporting agency describing the inaccurate information. You should also send a letter to the lender that is reporting the inaccurate information. Include copies of supporting documentation with both letters. The credit reporting agency is required to investigate your claim within 30 days.

After investigating, the credit reporting agency must give you written results of the investigation and a free copy of your report if the investigation resulted in a change to your report. You can also request a notice of correction be sent to anyone who received your credit report in the last 6 months.

If you disagree with the results of the investigation, you can add a written statement to your credit file (100 word limit).