Cincinnati Bankruptcy Attorney

Archive for the ‘Credit Tips’ Category

Running a credit check involves requesting a copy of someone’s credit report and credit score. Because a credit report contains personal information, there are restrictions on who can run a credit check on someone.

Legitimate Business Reason

You must have a legitimate business reason to run a credit check on someone. This can range from considering someone for a loan, renting them your property or hiring them for a job.

Permission

You must have the person’s permission before you can request the credit report. Most credit bureaus will require the person’s signature.

Court Orders

You are allowed to run a credit check if a court orders the check without the person’s permission.

Obligations

If you run a credit check on someone and as a result decide to reject his application, you must inform the person of the reason for the rejection, so he can correct any incorrect information on the credit report.

Where to Run Credit Check

You should run your credit check with at least one of the three major credit bureaus: Equifax, Experian and TransUnion.

A credit score is used by a lender and certain other service providers to assess the credit risk associated with an individual. Generally, the higher the score, the lower the risk associated with the individual.

The score is derived from a complex mathematical formula that evaluates information on a credit file. Your credit score is checked by lenders, insurance companies, some employers and leasing companies before making a decision on a credit request, employment or lease application.

Credit Reports and Monitoring

Visit the websites of the three major credit-reporting agencies, Equifax, TransUnion and Experian. On their respective websites, individuals can have instant online access to their credit report and dispute incorrect credit report information online.

Monitor the activity on your credit profile by signing up for credit monitoring with these agencies, pulling your free annual credit report or pulling your credit report on a regular schedule. These agencies offer services that allow you to sign up for email alerts on critical changes to your credit, perform personal analysis of your credit and debt and freeze your credit report to restrict future inquires.

Understanding Your Score

Credit scores range between 300 and 850 with most scores falling between 600 and 750 points. Having a high credit score does not guarantee credit nor does having a low credit score rule out credit.

The score is used as an indicator, coupled with other factors, which lenders and insurers use to predict credit risk. Efforts can be made to improve your score by paying down your debts, resolving any delinquencies, clearing out any improperly reported items and paying your bills on time. U. S. law prohibits credit-scoring formulas from considering your race, color, religion, national origin, sex or marital status.

Costs of Low Credit Score

Approximately 90 percent of the largest banks use your credit score for credit decisions. An individual with a low credit score may be able to obtain financing for a mortgage; however, it will come at a high cost because of higher interest rates.

A low credit score can also result in higher insurance premiums. Many property and casualty insurers use information collected from credit reporting agencies, such as your driving record, credit and claims history, to offer you the most appropriate rate.

Impact of Inquiries

When you apply for credit, you trigger an inquiry on your credit report. Inquiries you initiate as part of a credit request have a small impact on your credit score while an inquiry to obtain your credit score should not have any impact.

Furthermore, inquiries initiated for the purposes of preapproved credit offers do not have any impact on your credit score. During a rate-shopping period where a potential homebuyer is shopping mortgage rates, there is an allotted 30 to 45 day shopping window that limits the impact of the multiple credit inquires.

Sometimes a long period of financial hardship can lead to a bad credit score. The first thing you want to do when you have bad credit is to repair your credit so you can qualify for the financing you will need to purchase a home or car in the future. Repairing bad credit takes time, but it is not as difficult as it may sound.

Take Care of Current Debt

The first step to repairing your credit is to make sure your current debt is under control. Consolidate your credit cards into one account by using a consolidation loan or transferring your balances to one low-interest credit account.

Once you have consolidated your cards, stop using them. Pay off any old debts that may still be outstanding such as any old book club bills. Use cash as much as you can, and avoid applying for any new credit accounts.

Check Your Credit Reports

Keeping a close eye on your credit reports is essential to repairing your credit. There are many reputable services on the Internet that will help you obtain your credit reports from the three major credit-reporting agencies, but be aware that these services normally charge a monthly membership fee.

You can also go directly to the credit-reporting agencies yourself and purchase your reports. The credit-reporting agencies you need to contact are Equifax, Experian and TransUnion.

If you have been denied credit for any reason in the past 30 days, you are entitled to reports directly from the credit agencies at no cost. By federal law, you are entitled once a year to a free copy of your credit report from each of the three agencies.

Once you get your reports, check them for accuracy. Make sure each report has your current personal information correct, and also check all of your past information such as previous addresses and any aliases you have gone under.

Be sure you recognize all of the credit accounts listed on your credit reports, and make sure the balances and histories are accurate. If you see anything on your credit reports that looks incorrect, follow the instructions on the report on how to report an inaccuracy. The credit-reporting agency will get back to you within 45 days of receiving your request. Read the rest of this entry »