With the economy struggling and millions of Americans juggling their bills, the issue of credit and credit reports is hot. In the press, in private conversation, and all over the web the ins and outs of credit score management and credit report tracking are the topic du jour. Instead of chasing down all of the rumors and topical reviews, here is a condensed version of the latest news and other things you need to know about credit reports.
Everybody wants to use your credit report
After the lenient years leading up to the market crash in 2007 – 2008, lenders and creditors are suddenly extremely risk adverse. However, they are not the only ones who got burned in the market and what to prevent it from ever happening again. Insurance agencies, utilities firms, and potential employers have all developed a burning interest in knowing the state of your credit.
These non-traditional entrants into the credit monitoring market have raised red flags with consumer advocacy groups and individuals. They feel that these groups should not have access to your credit information at any level to avoid discriminatory practices.
For example, if an insurance company charged you a higher premium because you had a low credit score instead of because you lived in a high risk neighborhood, then these groups would be upset. Chances are that you would be upset, too, especially if an employer didn’t hire you because you had bad credit regardless of your qualifications for the position or if you didn’t get admitted to a college because your credit score indicated you would struggle to pay the tuition.
Finding the right balance between protecting personal privacies and allowing companies to protect themselves against risk of loss will be an interesting challenge. You’ll want to keep a close watch on the news to see which way things go, and be sure to express your opinions whenever asked as much of the legislation surrounding this kind of use of credit reports is being driven by the public debate.
Your scoring methods for credit reports are changing
While credit reports do not necessarily contain credit score, they are used to figure credit scores. Fair Isaac’s FICO methodology is the dominant algorithm in the marketplace. However, traditional FICO scores are being updated with new ranking metrics that could change your score and the importance of the various items on your report.
The new system is not fully disclosed, but it is known to assess fewer penalties for the occasional late payment. Carrying a higher percentage of debt to income is also rated less harshly. Some critics have complained that this is pandering to a nation of debtors, but fans say that it merely reflects a more realistic lifestyle for the average spender.
Constant access to your reports is possible
Another development in the credit report space has to do with access. Thanks to credit monitoring services, constant access to your credit reports is possible. Reviewing your own information doesn’t impact your credit score and won’t show up as an inquiry on your credit report, allowing you to look whenever you like without guilt.
While some say that constant access to your credit report serves no purpose, others point out that being able to readily monitor your data prevents account fraud. Catching an identity theft or erroneous charge early greatly reduces your personal liability for losses. It can also help you with your financial management plans and with managing family scores in real time.
Your credit report isn’t a value judgment on your life
Finally, the most important thing to remember about credit reports, especially in this era of economic turmoil, is that credit reports are not judgments on your life. Your personal choices, your financial holdings, and your credit history are merely listed, and at the end of the day the numbers are just that—numbers. While millions of Americans lie awake at night wondering how their credit reports will make them look in the eyes of others, they have their health, their families, and their freedoms. Thus, no matter what the headlines say, remember that credit reports are about business, and not about you.
loading...
Related Links:
Credit reports are something that you hear a lot about but often don’t truly understand, even though they can have a big impact on your life. Used to make financial judgments, credit reports reflect your ability to take on and manage debt. However, the reports are confusing and frustrating to many. Instead of continuing in confusion, learn more about the history of credit reports, the basic features of a credit report, the types of credit reports available, and ongoing trends in credit reporting by reading this article.
History of credit reports
Credit reports didn’t used to be such formal documents. These days, if you want a credit report, it will run several pages. However, in the beginning, credit reports were little more than word of mouth references indicating that you were good for a debt.
Letters of credit were the next level, used to introduce your financial situation to a potential business partner. Usually written by a bank or a government, they detailed your resources and limits. Typically, these letters of credit were the reserve of the wealthy or international traders. However, with the rise of technology and consumer lending, creditworthiness for all was suddenly a consideration.
Credit bureaus were born, and the centralization of credit information picked up dramatically. In 1956, Fair Isaac scoring for creditworthiness was born, distilling the information in the credit reports into hard numbers. The combination of scores and reports became the basis for credit and loan decisions all over the US as a result.
Basic features of credit reports
Credit reports are different than their derivative, credit scores. Credit scores are just three numbers, while credit reports are an extensive look at your entire financial profile. Typically several pages long, they feature several pieces of key information about your spending and credit management skills.
Credit reports cover your credit history, giving the age of each line of credit in addition to the overall length of your credit life. They also cover your payment history, showing total amounts owed, whether or not payments have been made on time, any amounts that are late or delinquent, and any bankruptcies.
Another basic feature of credit reports is information about credit inquiries. These are business inquiries into your accounts, which should be there if you are looking to open or expand a line of credit. Looking at the number of inquiries can also let you know if your account is being accessed by an unauthorized user.
Types of credit reports available
Credit reports are available in two main forms. The first kind of credit report is focused on just one credit bureau. This shows you all the data they have collected, which may be different than what appears with another agency. The second form of credit report addresses the limitations of the first by including information from all three major agencies.
It is important to remember that credit reports are just reports. Scores are issued separately, and generally for an additional fee. Credit reports are not formal inquiries, and you can look at your credit report at any time without impacting your credit score.
Ongoing trends in credit reporting
Credit reporting is currently in the midst of two major trends. The first is a driver for greater transparency around scoring. The second is the desire by consumers and governments to protect credit information from identity theft and hackers.
These two trends play off in the public space with interesting applications for consumers. For transparency, there are now credit monitoring services that will give you a daily view of your credit report if you like. Also, thanks to the 2005 FACT Act, consumer can get free copies of their credit reports once each year from the major bureaus.
On the identity protection front, you now have to do more identity verification to view and make changes to your credit report. These multiple layers of security appear to be at odds with the push for easier access and greater transparency around credit information, but not all consumers mind the extra hoops. Since an estimated 10 million Americans are affected each year by identity theft, the Federal Trade Commission is simply responding to market demands in recommending greater security.
loading...
Related Links:
 TrueCredit.com |
Summary:
|
||||||||||||||||||||||||||||
| Home | About | Contact | Apply |
|
|
loading...
