Credit Report PodcastCredit Report Podcast
***All items in this podcast are either direct quotes or paraphrases of the material stated in the book Personal Finance 11edition, by E. Thomas Garman and Raymond E. Forgue.***
Obtaining Credit
To obtain credit you must first complete a credit application.
A credit application is form or interview that provides information about your ability and willingness to repay debts.
The Credit Approval Process
After receiving your application for credit, the lender will conduct a credit investigation and compare the results to the information that you have provided on your application.
The Credit Approval Process
To conduct this investigation, the lender will obtain a credit report from a credit bureau.
The Credit Approval Process
Lenders use a credit score (also called a risk score) in which a statistical measure is used to rate applicants on the basis of various factors.
The Credit Approval Process
The most well-known score is the FICO score. The FICO score ranges from 300 to 850.
Build a Strong Credit History
1. Establish both a checking and a savings account.
Lenders see people who can handle these accounts as being more likely to manage credit usage properly.
2. Have your telephone and other utilities billed in your name
If you can maintain a good payment pattern on utility bills, it shows that you can manage your money wisely, and will do so with your credit repayments.
3. Request, Acquire, and Use an oil-company credit card.
These cards are relatively easy to obtain. Use the credit sparingly, and repay the debt promptly.
4. Apply for a bank credit card.
Your own bank is the best place to start your search for a credit card. Your credit limit may be low, with a high APR (annual percentage rate), but the point is to establish a credit history. You can later request an increase on your limit and a lower APR.
5. Ask a bank for a small, short-term cash loan.
Simply put the borrowed funds into a savings account that will almost guarantee you to make the monthly payments. Additionally, the interest earned on the money in the account will help offset the interest charges on the loan.
6. Pay off Student Loans
Most people have their first experience with credit through student loans used to attend college. Paying these loans off quickly can show a potential lender that you are a responsible borrower.
Access Your Credit Report for Free!!
Access Your Credit Report for Free!
“Federal law requires credit bureaus to provide consumers with their credit reports upon request.” (Garman & Forgue, 181)
Access Your Credit Report for Free!
3 Major Credit Bureaus:
Only one website to obtain a free credit report,
www.annualcreditreport.com
Access Your Credit Report For Free!
The free annual credit report law allows you to check your credit score for free every four months. How? By requesting your report from one of the three each time. For example, in January, request a report from Experian. In May, request a report from TransUnion. In September, request a report from Equifax.
Access Your Credit Report For Free!
When you obtain your report, be sure to read over it thoroughly to inspect for accuracy. If an error is found, the Fair Credit Reporting Act (FCRA) allows you to challenge that error since it requires that all information contained in the report to be accurate.
Access Your Credit Report For Free!
If there is an error or omission in a credit report, you should immediately take steps to correct the information.
Steps to Assert Your Rights.
1. Simultaneously notify both the credit bureau and the original lender of the error and ask for confirmation. State that you wish to exercise your right to a reinvestigation under FCRA. Specifically, you should ask the bureau to reaffirm the item.
2. The bureau and lender must reinvestigate the information within 45 days. If the bureau cannot complete the investigation within 45 days, it must drop the information from your credit file.
Steps to Assert Your Rights.
3. If the information was erroneous, it must be corrected. If a report containing the error was sent to a creditor investigating your application within the past six months, a corrected report must be sent to that creditor.
4. If the credit bureau refuses to make a correction (because the information is “technically correct”), you may wish to write your version of the disputed information (in 100 words or less) by adding a consumer statement to your credit file.
Steps to Assert Your Rights.
5. Also obtain a report from the other two bureaus to ensure that the error does not also appear in their files.
6. Negative information in your file is generally not reportable after seven years except for bankruptcy, for which the time limit is ten years.
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