by: Michael Creditfirm
Understanding the words used in the credit industry is the first step in understanding how your credit works. Here is a list of the most common industry terms. You may want to print these out and keep them for your records.
CDIA – Consumer Data Industry Association. The CDIA is an international trade association that represents consumer data companies including the nationwide consumer reporting agencies.
Consumer Report – Reports provided by consumer reporting agencies to lenders and other users. The FCRA defines a consumer report as “any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for (A) credit or insurance to be used primarily for personal, family, or household purposes; (B) employment purposes; or (C) any other purpose authorized under section 604 [of the FCRA].” The FCRA provides a limited number of exclusions to this definition.
Consumer Reporting Agency – The FCRA defines a consumer reporting agency (CRA) as “any person, which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.”
Credit File/Consumer File – The information about a consumer that is contained in the databases of credit reporting agencies. According to the FCRA, the term “file,” when used in connection with information on any consumer, means all of the information on that consumer recorded and retained by a consumer reporting agency regardless of how that information is stored.
Consumer File Disclosure – Information provided to a consumer when that consumer requests a copy of the information in his or her file at the NCRA.
Credit Report – Popular term for consumer reports used or purchased by lenders.
Credit Reporting Agency/Credit Bureau – Popular term for consumer reporting agencies in the business of providing consumer reports to lenders.
ECOA – Equal Credit Opportunity Act.
e-OSCAR – The Online Solution for Complete and Accurate Reporting. Web-based computer software system used by Equifax, TransUnion, Experian, and Innovis to communicate with furnishers about consumer disputes.
FCRA – Fair Credit Reporting Act.
Furnisher – Generally refers to an entity that provides information relating to its own transactions or experiences with consumers to one or more consumer reporting agencies for inclusion in consumer reports.
40 CONSUMER FINANCIAL PROTECTION BUREAU, DECEMBER 2012
Inquiry – A request for a consumer report.
Metro 2® – The industry standard format for furnisher data contributions created in 1997 by the CDIA on behalf of Equifax, TransUnion, Experian, and Innovis.
NCRA – Nationwide consumer reporting agency. For the purpose of this paper, an NCRA means Equifax, Experian, or TransUnion.
Public Record – Generally, a record that a governmental body is required to maintain, and which must be accessible to scrutiny by the public. Definitions of public records can vary by federal, state, or local jurisdiction.
Reinvestigation – An investigation by a consumer reporting agency or a furnisher into the accuracy or completeness of information in a consumer’s credit file in response to a consumer dispute of such information.
Trade Line – Information furnished by a creditor to a consumer reporting agency that reflects the consumer’s account status and activity. Trade line information includes the name of companies where the applicant has accounts, dates accounts were opened, credit limits, types of accounts, balances owed and payment histories.
CreditFirm.net has helped thousands of consumers improve their credit reports and increase their credit scores. Call 800-750-1416 for a free consultation with one of our experienced credit consultants and take the first step toward improving your credit today.
by: Michael Creditfirm.
1. Your credit report is your resume
Consider your credit report as a positive reflection of how well you repay debt. A lot of people see credit, whether good, bad, or ugly, as something that happens to them. Your actions directly impact your credit report, and good credit is the result of properly managing your bills and finances. Credit is not something that just happens to you, you control your credit, and in turn how potential employers and lenders see you.
2. Your credit report is an asset
Your credit determines your creditworthiness when applying for loans. It determines your interest rates, down payment amounts, and whether a lender can trust you to pay back the amount you are borrowing. You should protect your credit the same way you would protect your child. Never sign anything until you completely understand all of the term and conditions. And do not risk your credit by co-signing for other peoples loans.
3. Build your credit Portfolio
a. Your credit file must be built thoughtfully, carefully and strategically, account by account. Make sure that you establish a good mix of credit via both installment and revolving loans, credit variance accounts for 10% of your credit score.
b. Do not close old inactive accounts, keep them open and keep them active so that the issuers do not close them. The older your accounts, the better. Length of history accounts for 15% of your credit score.
c. Keep your balances low in relation to your credit limits. A good rule of thumb is to keep your balances under 20% of your credit limits. Example: If you have a credit card with a $1,000 limit, keep your balance at $200 or less. Amounts Owed accounts for 30% of your credit score.
d. Limit yourself to applying for a maximum of one credit transaction every 6 months. New accounts will lower your average length of history and too many hard inquiries will tell creditors that you are hungry for credit and lower your credit scores.
4. Shop around and do your research
Shop around for the best available interest rates and terms. Do not settle for the first offer, haggle on everything from the price to the interest rate. Do your due diligence and read offers for credit thoroughly so that you are not blindsided. Take your time, do your research, and don’t be rushed into anything, even when pressured by a salesperson.
5. Good Credit is cheaper
Having bad credit can be very expensive. It’s very common to see people with bad credit paying twice as much as a person with good credit for a mortgage, auto loan, or credit cards. But, applying for credit doesn’t have to be a nerve wrecking experience. Buying a new house or car should be an exciting time, and it is if you have good credit. You can qualify for the best deals, the best rates, and the lowest monthly payments. Good credit dramatically improves your quality of life by decreasing your monthly expenses and increasing your borrowing potential.
So what are you waiting for? Sign up today and take the first step to Good Credit Now!
Lenders Still Want Great Credit Scores for Mortgages
These days, many consumers are likely finding it easier to obtain many types of credit, as lenders have significantly slackened requirements for most loans and credit cards. However, the qualifications to obtain a good mortgage rate remain stubbornly high across the country.
Even as credit conditions improve significantly nationwide and many financial institutions are once again broadening lending efforts, many are still being extremely tight with financing for mortgages, according to a report from the New York Times. In fact, even as subprime lending for credit cards opens up considerably, many consumers with low credit scores will find themselves extremely unlikely to even be considered for a home loan approval.
A recent study by the Federal Reserve Board indicated that consumers with a credit score of 620 willing to make a 10 percent down payment are now less likely to be approved for a mortgage than they were in 2006, the report said. Further, some were even reticent to extend financing to borrowers making a similar down payment when their credit rating was 720.
This is because most lenders are still extremely gun-shy about lending large sums of money to anyone but the most qualified borrowers, the report said. In many cases, those who are approved for a home loan will also pay far higher rates on the mortgage than those who have top-notch credit scores, even as the average interest rate has hovered below 4 percent for some time now.
“If you don’t have good credit, you’re not going to get that crazy low rate,” Deborah MacKenzie, the director of counseling at the Stamford, Conn., nonprofit the Housing Development Fund, told the newspaper.
Typically, the only way consumers can improve their credit ratings so that they can qualify for a home loan is by being smarter about managing their various lines of credit, including keeping credit card balances low and making all payments on time and in full. These are the two biggest factors comprised in a credit score. However, consumers can also be hurt by applying for too many new lines of credit within a short period of time, so avoiding this ahead of shopping around for a mortgage can be crucial to maintaining good credit health as well.
Credit Report Repair
If you have any questions about your credit report or would like to find out how Credit Firm can help you improve your credit history and increase your credit score please contact us.
The rate at which consumers fell behind on their home loans declined considerably in the first quarter of the year, and now stand at levels not seen in years.
The delinquency rate on home loans for properties of between one and four units fell to 7.4 percent of all outstanding loans in the first quarter of the year, down from 7.58 percent in the fourth quarter of 2011, and 8.32 percent in the same period last year, according to the latest statistics from the Mortgage Bankers Association. While declines are traditionally viewed in the first quarter of every year, the MBA’s data shows that the drops this year were more significant than traditional adjustments would have predicted, showing that the declines are real, rather than the result of seasonal norms.
“Newer delinquencies, loans one payment past due as of March 31, are down to the lowest level since the middle of 2007, indicating fewer new problems we will need to deal with in the future,” said Michael Fratantoni, the MBA’s vice president of research and economics. “The percentage of loans three payments or more past due, the loans that represent the backlog of problems that still need to be handled, is down to the lowest level since the end of 2008. Foreclosure starts are at their lowest level since the end of 2007.”
Delinquency fell for all types of mortgages except VA loans on a quarter-over-quarter basis, the report said. Prime fixed rate loan delinquency now stands at 4.07 percent, and late payments for prime adjustable-rate mortgages dropped to 9.05 percent, down from 9.22 percent in the fourth quarter. Further, loans backed by the Federal Housing Administration also saw drops in delinquency, falling to 12 percent from 12.36 percent a quarter earlier. The rate of homes that were in foreclosure increased on a quarterly basis, however, rising to 4.39 percent.
As the economy continues to generally improve, consumers are finding themselves in a better position to pay off all their outstanding debts on time. Factors such as declining unemployment rates and rising salaries have contributed to Americans feeling better about their personal financial situations. Experts believe that these trends will likely continue for some time, meaning that the housing industry may continue to improve, encouraging more qualified buyers to enter the market.
In the last year or more, many consumers have made conscientious efforts to reduce their reliance on credit cards and increase the timeliness of their payments, leading instances of delinquency and default to slip to at or near all-time historic lows.
But lenders will likely see their net charge-off rates slip for one more quarter before expanding again by the end of the year, finishing 2012 with higher rates of defaulted accounts than they began with, according to the latest report from analysis firm Fitch Ratings, entitled “Credit Cards: Asset Quality Review.” At the end of the first quarter, the net charge-off rate observed by the nation’s seven largest credit card lenders stood at 4.02 percent, down from 4.2 percent at the end of 2011, and 6.39 percent in the first quarter of that year.
Further, charge-offs are well below the five-year average of 6.51 percent observed between 2007 and 2011, the report said. And because of trends in 30-day credit card delinquencies, which itself is well below the five-year average, it’s likely that the current charge-off rate will decline once again in the second quarter of this year.
However, the trend may soon reverse because consumers are once again feeling better about their finances in general, the report said. Portfolio contraction among major lenders more or less held steady in the first quarter of the year, and smaller card issuers actually saw more consumers opening new accounts.
As a consequence of this trend, which may also be the result of expanding credit standards that are allowing subprime borrowers to once again access lines of credit they were unable to tap just a year ago, it’s likely that defaults will begin expanding once again, trending back toward historical averages from the current levels. Many had long projected that there must be a logical point at which charge-offs bottomed out, and we could soon see that point.
Millions of accounts were written off by lenders as uncollectable during and immediately following the recent recession as card issuers tried to shield themselves from significant loan losses as a result of consumers who could no longer afford to pay their bills. However, the improving economy has emboldened most major lenders to once again extend credit to those who previously defaulted on their accounts.