Understanding
Credit Reports
Family Economics & Financial
Education
© Family Economics & Financial Education – Revised October 2004 – Credit Unit –Understanding Credit Reports
Credit Reports
◊
___________________- a record of a consumer’s credit
history
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Credit history - a record of transactions involving credit use
◊
Individuals do ___________ have a credit report if they
have not previously used credit
Information on a Credit
Report
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Name and aliases
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Current and past addresses
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_____________ status
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Date of birth
◊
Employment history
◊
_____________ records
◊
Judgments, criminal, and
bankruptcy
◊
Credit card, store card, book
Payment history
◊
Credit card, store card,
© Family Economics & Financial Education – Revised October 2004 – Credit Unit –Understanding Credit Reports
Information continued
◊
Financial _____________
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Loans, bounced checks, closed
accounts, etc.
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Loans/______________
◊
Rent-to-own contracts, payday
loans, lease agreements, etc.
◊
Credit inquiry-
◊
Number of credit inquiries
◊
Credit
______________-a request for your credit.
Can be done by businesses
you apply to for credit or
whom
pre-approve you for credit
*Medical information is
not
on a consumer’s credit report, but
_____________medical payments are.
Building Credit History
◊
Important for consumers to build a _______ _________
to be able to purchase items on credit
◊
For example – house, vehicle
◊
Affects a young adult’s _______________to make a
purchase on credit in the immediate future including:
◊
Renting an apartment
◊
Buying a car
© Family Economics & Financial Education – Revised October 2004 – Credit Unit –Understanding Credit Reports
Building Credit History
continued
◊
________ accounts (JcPenny or Sears charge accounts)
◊
Credit card accounts
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Even with a co-signer
◊
Loan from financial institution
◊
Acquire a small loan from a financial institution and pay the loan off
in _____________ payments to develop a _______________
credit history
No Credit History
Having _________ history of credit use
Not having any credit accounts in own
name
Paying ___________ for all major
purchases
Paying phone and utility bills on time
While the following are all positive financial practices, a
credit history is not built if a consumer performs the
following actions:
© Family Economics & Financial Education – Revised October 2004 – Credit Unit –Understanding Credit Reports
Positive Credit
◊
Practice good banking techniques
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Keep checkbook balanced, do not
bounce checks
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Pay bills consistently and on time
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Keep public records free of
bankruptcy
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Have no criminal record
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Keep a reasonable or small amount of
debt
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Apply for credit sparingly, keeping
credit inquiries low
◊
Hold a low number or credit/store
cards
◊
Check credit report annually to
remove errors
◊
Maintain reasonable amount of
unused credit
◊
Being _______________ with credit and finances can
lead to good credit
General Rule
◊
Percentage of current debt compared to
the total credit available is reviewed by
potential _________________.
◊
Keep the amount of debt currently held
at __________ of the total amount of
available credit
◊
For example - if Sue’s total amount of credit
available is $1,000, her current amount of
debt should not exceed $250
© Family Economics & Financial Education – Revised October 2004 – Credit Unit –Understanding Credit Reports
Negative Credit
Bouncing checks
Routinely paying bills late
Having a criminal record
Holding a large amount of debt
Holding an unreasonable amount of
unused credit
Not paying utility or cell phone
accounts consistently and on time
◊
Being irresponsible with credit and finances can lead to
____________credit
◊
A consumer may develop or keep poor credit by:
Obtaining a high number of credit
inquiries
Carrying many credit/store cards
Having a public record of
bankruptcy
Defaulting on a loan
Credit Reporting Agency
(CRA)
◊
Keeps a ____________ of a consumer’s credit
transactions and compiles credit reports
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Acquires information from several different types of
lending companies
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Information on credit reports _____________ between
each individual agency
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Lenders may only report to one credit agency
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Consumers should contact all agencies when checking their credit
© Family Economics & Financial Education – Revised October 2004 – Credit Unit –Understanding Credit Reports
CRA’s continued
The three main credit reporting agencies are:
◊
___________________
www.equifax.com
(800) 685-1111
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___________________
www.transunion.com
(800) 888-4213
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___________________
www.experian.com
(800) 397-3742
Who Reports to CRA’s?
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Store accounts
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Credit card companies
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__________ and other loan lenders
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Financial institutions
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Landlords
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Courts
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_________________ accounts
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____________ __________ companies
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Delinquent accounts
© Family Economics & Financial Education – Revised October 2004 – Credit Unit –Understanding Credit Reports
Requesting Credit Reports
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Consumers can request his/her credit report any time
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Can obtain one ________________ credit report annually
from all three credit agencies www.annualcreditreport.com
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Additional copies can be purchased for no more than $9.50
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Consumers should check credit report
_________ a year for accuracy
Requesting continued
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Insurance agencies
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Current and potential credit
companies
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State/local child support agencies
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Government agencies
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Financial institutions inquiring
for lines of credit
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Landlords
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Potential employers
◊
Only with applicant’s written
request
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Any time a consumer requests credit from
a business, they are able to review his/her
credit report. This may include:
© Family Economics & Financial Education – Revised October 2004 – Credit Unit –Understanding Credit Reports
Mistakes in Credit Reports
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More than ____________ of the credit reports checked
in a study contained errors
◊
Consumer Reports
(July 2000)
◊
The two main errors commonly appearing in a
consumer’s credit report are:
1) Mistaken _________________ – occurs when a lender
reports a credit transaction and information is recorded on the
wrong person’s credit report, usually of a similar name
Fair Credit Reporting Act
◊
Enacted to protect the consumer in ____________
◊
Designed to promote accuracy and ensure privacy of
information in credit reports
◊
Consumers have the ___________:
◊
To know the information in their credit report
◊
To have errors corrected in their credit report
© Family Economics & Financial Education – Revised October 2004 – Credit Unit –Understanding Credit Reports
Correcting Errors on Credit
Reports
Steps include:
◊
Contact the particular credit bureau that has the error
◊
CRA must report to the consumer within __________ days
◊
If the CRA can’t verify the information, then it must be
removed from the file or if in error it must be corrected
◊
If a consumer disagrees with result of CRA investigation, they
have the right to submit a _____________ word explanation
which stays in the consumer’s file
◊
Negative information is usually removed from credit file after
______________ years, except bankruptcy which is removed
after 10 years
Correcting Errors on Credit
Report Cont.
◊
According to the Better Business Bureau
(BBB) and the Federal Trade
Commission (FTC):
◊
Consumers can do just as ____________
of a job repairing their credit report errors
as a fee based debt repair agency
◊
Be cautious of debt repair agencies
promising instant help because there is
________ immediate fix for poor credit
© Family Economics & Financial Education – Revised October 2004 – Credit Unit –Understanding Credit Reports
Credit Scores
◊
A mathematical tool created
to help lender evaluate the risk
associated with lending a
customer money
◊
Scores range from ______________, with 850 being
the best score
◊
Not listed on a credit report
◊
Each CRA has an independent ________ system based
upon a standard percentage of five different categories
Five Standard Categories of
Scores
1.
35%-Payment _________________
- Timely manner in which a consumer pays debt
2.
30%-Outstanding ___________
-Amount of debt currently held
3.
15%-_________________ history
-How long the consumer has held credit accounts and how often they are used
4.
10%-Pursuit of ______________ credit
-How much credit is acquired over the length of the consumer’s credit history
5.
10%-Types of credit in ___________
© Family Economics & Financial Education – Revised October 2004 – Credit Unit –Understanding Credit Reports
Credit Scores continued
Other factors calculated into a credit score may include:
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Length of time at current address
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Current _____________
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Financial information
◊
_____________payments
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Amount of outstanding credit
◊
Amount of credit in use
Financial Effect of Credit
Scores
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________________ rate of loans
◊
High score – can insure a lower interest rate on credit
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Low score– can cause a higher interest rate on credit
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Ability to receive future loans/____________
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Financial lending institutions have guidelines of
what score will qualify for a loan
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Reflection of _________ of borrower to the lender
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The lower the score, the higher the possibility the consumer pays bills late
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Financial security for ___________________
◊
Takes time to improve credit, which could take time from building financial
© Family Economics & Financial Education – Revised October 2004 – Credit Unit –Understanding Credit Reports
