3 Credit Reporting Agencies

There are many private credit bureaus which state they would offer credit reports. But beware. They could be scams. In the US there are only 3 credit bureaus which offer credit reports. These give a fair idea to the creditors whether they are taking the right decision while lending the money to the individuals.

What are credit reports and how does the credit score affect a person:

All the 3 credit bureaus Experion, Transunion and Equifax are actually helping the stakeholders i.e. the creditors in this case earn their bread and butter. These bureaus provide the credit report and also counsel you on what modifications you need to make. They also keep you posted 2 times a year on the status of your history and also caution you when you are about to exhaust your limit.

Your credit score which reflects on the credit report plays a very important role in your standard of living. One must understand that the reports generated by these credit bureaus may not tally with each other in all respects. The approach adopted by these credit bureaus may be similar in fashion. One would notice that the report generated by these 3 credit bureaus would more or less imply the same thing. A credit report includes the name of the borrower, his address and the name and address of his employee, place of work etc.

Information or data related to his past credit – whether he or she has any past pending loans or mortgages to be cleared – credit balance at the banks etc.

Pattern of payments – it gives an idea of your past payment pattern. How regular or irregular one has been with respect to settlement of monthly bills, loans etc.

Legal records – whether there are any cases of litigation or legal case proceedings in the court of law against you.

Your personal statements – It is mandatory for an individual that he provides a statement containing all the personal information.

Most information contained in the credit report should have error free information. One should ensure that you give attention to details in the credit report. Credit bureaus have good contacts with creditors and financiers. Since they are in the industry since a long time, it enables the credit bureaus to generate error free and accurate reports. Each credit bureau would have its set pattern relating to the past history of an individual’s credit pattern. Each credit bureau would generate reports based on the credit score of the individual.

Credit bureaus main source of income is the technology of credit scoring. The credit bureaus generate credit reports based on the individual’s credit score which enables the creditors to decide whether it is worth giving credit to an individual or whether the individual is credit worthy.

Calculation of credit scores: Credit bureaus use the FICO score to arrive at the credit score of an individual. Most of the creditors work in close association with credit bureaus to arrive at a decision. In case you are moving to a new residence and you need an electric connection, the electric company would first get in touch with the credit bureau to find out your creditworthiness.

Cell phones: While purchasing a cell phone also, the cell phone company would first confirm with the credit bureau regarding one’s creditworthiness.

Accessibility: Every individual has free accessibility to credit reports. Individuals can contact the credit bureaus and get their free credit report annually. You need to pay a fee to the credit bureau for getting your credit score.

It is also important that one checks the credit report for any errors or ambiguity. One needs to also ensure that the credit report is up-to-date, accurate and clean before applying for a loan.

Car Repossesion and Credit Report

Your credit score is affected if you are a victim of car repossession. Now let us see how this operates. Assuming you are no longer able to make your EMI payments, it would automatically reflect in your credit report. You would have already crossed the 30-60 days due date. Realization would have set in only after 2 or 3 months. Now, what do your do. It is definitely not good if the repossession occurs.

Say for example X Company wants to repossess your vehicle and your outstanding amount of loan is about 9000 dollars. Once the company is in possession of your car, they have every right to dispose off your vehicle. Suppose they dispose off your vehicle for about 5000 $, they would still want you to settle the outstanding amount. You would still have to pay the outstanding amount even though you do not own the vehicle. Your credit report would reflect the repossession item. It would be denoted by I-9, which indicates that you have yet to settle the installment amount.

If the company feels it is not able to get the money back from you, then would write off this as a loss or bad debts.

Now what happens when you intend applying for a loan from another company. They would want to check your credit report, and if they notice the repossession clause, it would affect your creditworthiness. You can be rest assured that they would not want to have any dealings with you. This entry would remain in your file for the next 7 years, making it absolutely difficult for you to get any future loans and credits.

Your credit score automatically drops down and you are not in a position to get any credit from any company. Despite your best efforts to settle the balance loan amount, the entry still lingers in your credit file for the next seven years. There are possibilities that you could still talk to your creditors that you have paid off the outstanding amounts. Ensure that you communicate with your creditors in writing. Also ensure that your creditor also pens down the agreement so that there are no errors or any communication problem. Hence one is advised that one maintains all communication in written form.

If your credit report goes for a toss, then it is extremely difficult to rectify it. This does not imply that you have permanently spoilt your credit report; it implies that it would take time to rectify the damage caused. One needs to ensure that one pays off all the pending loan amounts due and start afresh, applying for a loan. There are methods and means where you have to pay the creditor about 500$. This is just like a deposit, in case you are unable to make the payments. The creditor is assured that he has not lost his money. The payment due would be deducted from this deposit amount.

A bad credit score could also be a hurdle in getting a good job. You would also have to exorbitant rates of premium on your car and vehicle insurance.

Foreclosure and Your Credit Report

People who have faced foreclosure need to hire a credit advisor who will help them clean up the tarnished report. Besides the payment defaults that appear on the report, there are other issues like” Notice of Trust Sale” and the “Trust Deed Sale” which worsens things. Since there are so many things you need to deal with, hiring a credit advisor would be beneficial and can work with you to suggest ways to improve the credit scores from the current levels.

Though a clean up will not mitigate the negative impact of the foreclosure for close to a year, you can breathe easy for the next 7 – 10 years. Since the report will reflect prominently the last year details, it is in your interest to iron out the gaps to achieve financial bliss.
The bad news is that you will encounter refusal of credit, for a car or for your personal use over the next 3 – 5 years once the foreclosure is mentioned on your credit report.

You will need to get a score of 740 or higher to avail of a 30-year home loan at fixed rate of interest and even then, banks will want a 20% margin payment upfront. Some banks may permit a score of 620 and a 10% margin payment, but the fact is that you need to clear the report of its bad elements at the earliest.

Now the question is, what can be worse – foreclosure or bankruptcy. Opinion is divided on this, though many feel that a foreclosure is viewed more seriously by the creditors, the assumption being that bankruptcy excludes the house. Borrowers need to quickly start making up on the payment of the defaulted ones to retain the house.

You have two options – to restructure the agreement to procure a lower rate of interest or to ask for some time during which the creditor accepts suspension of payments till you can start making them again. As a desperate third option, if you absolutely struggling for finances, you can request the creditor to postpone foreclosure till you can dispose off the asset. You may still not get the amount you seek and have debt to be settled, but at least you can work out a “deed in lieu of foreclosure”, wherein you pledge your house to the bank.

Many people look at bankruptcy as an option but this needs to be used as a last gambit, since it can be very destructive to your credit report. You anyways need to make the monthly payments even when you declare insolvency. The only relief is you have the court on your side till the time you make up for the missed payments.

It is better to work out a restructured plan with the creditor and start making the payments slowly over an agreed tenure. This will not impact your credit score very harshly and you can set it right in the next 12 to 18 months.You can also request for some time from the creditor, to recover from a temporary problem of finances. You however, need to then meet the commitment made without fail.

Credit Reporting Scams

Every now and then, you have fraudsters trying to make a quick buck by cashing in on the gullibility of people caught in some problem. Currently due to the financial crisis and job losses, people who are unable to make their mortgage payments are the target for such fraudsters. They have sprung up in the form of credit repair companies and make grand commitments of improving the credit rating as well as putting an end to the bankruptcy. Obviously, these claims have to be taken with a pinch of salt and need to be investigated further for their veracity before venturing into any agreement with such companies.

The country is facing immense financial turmoil and many have found out that they are deep in debt with little hope of even making the minimum payments. This has led to an increase in the demand for credit repair and as an extension to scams due to bogus companies trying to make a quick buck.

It is difficult not to be swayed by these attractive offers of total waiver of debt and other processing charges. Though people find it too good to be true, they are still enticed given their current mental condition. The fact is and it is better to reconcile oneself to that fact sooner than later is, you have built up that debt and you have to clear it off. There are no free lunches!

It is not as if there is no market for genuine credit repair companies. Very often due to errors in data entry or theft of identity, your credit history may reflect a different picture and this is possible in 25% of the cases. You can now lodge a formal process to rectify this and need to take the assistance of a credit repair company. They will correspond with your creditor on your behalf for a fee or you could choose to do it yourself at no cost.

Many sites dole out credit reports. You could pick on and check if your scores are correct. If not, you have the option of proceeding as mentioned above. These checks on a periodical basis are important and may save you precious money when you decide to make a big buy. Knowing the problem can help you sort it out at the earliest.

The lesson to be learnt is to be aware and alert. Do not get taken in by the attractive offers that promise to change something which it cannot. If at all, credit ratings need to be reviewed and changes to be made, you are the best person to do it for yourself. It is better to help yourself and save money than approaching such companies and losing both money as well as peace of mind. You can use the money saved to clear your debt.