As a result of a recent settlement between New York and the three largest credit reporting agencies, consumers have easier access to their credit reports and score. TransUnion, Equifax and Experian also agreed to overhaul their approach to evaluating credit, fixing errors and the way they deal with medical debt on consumer credit reports. Although the settlement was with just one state, these changes should be enacted everywhere soon.
Your credit profile can make a big difference in your financial life. You probably already know that your credit score can affect you when it comes time to purchase a car or a home, but it goes far beyond that. Your credit profile can have an impact on college loans, credit card terms and insurance premiums, renting an apartment or even when you apply for a job.
That's why it is important to be familiar with your credit report and credit score. Your credit report has important information about your financial accounts, how you pay your bills, and whether you've filed bankruptcy. It's important to make sure everything is accurate before you shop for a car, apply for a job or look for a mortgage. Nationwide credit reporting companies sell the information in your report to creditors, insurers, employers and businesses that use it to evaluate your application. If you find a discrepancy, contact the credit report
ing company and the business providing the information, and provide them with information to make corrections.
The Fair Credit Reporting Act requires Equifax, Experian, and TransUnion to provide you with a free copy of your credit report, at your request, once every 12 months. Only one website is authorized to fill orders for the free annual credit report you are entitled to under the law -- AnnualCreditReport.com. You may also call 877-322-8228 and request your reports. Do not contact the three nationwide credit reporting companies individually.
Consumers who are disputing their credit reports will be able to get a second copy, at no cost, from each of the three reporting agencies.
Thanks to the March settlement, trained personnel will now handle the dispute resolution process that was previously handled by automated processes. The agencies must examine documentation from the consumer and the lender, and make a reasoned judgment rather than simply accepting the lender's version of events. They must also wait 180 days before adding medical debt to a credit report and remove this debt from a report when an insurance company has paid it. The settlement also prohibits collection companies from reporting items that did not arise from a contract or an agreement to pay, including items like fines or tickets.
Your credit score is determined by the information contained in your credit report. The most common credit score is your FICO score, a three-digit number ranging from 300 to 850. What's a good credit score? That can vary but in general, a score of 720 or higher is eligible for the most favorable terms, below 700 you may have to pay a premium for credit, below 620 you could have a problem getting a loan at all. This score also affects your insurance costs, job eligibility and ability to rent.
Until recently, you had to pay to see your score. The Consumer Financial Protection Bureau has been promoting free access to consumer's credit card score through their credit card companies. More than 50 million consumers can now see their credit card scores for free. You should still review your complete credit report to make sure it is correct. Checking your credit report can also help you guard against identity theft.
This settlement will make it easier for you to monitor your credit report and score. Take care to only use the approved site, AnnualCreditReport.com, to get your free credit report.
You should be able to obtain your credit score at little or no cost. If you must pay, you do not have to subscribe to an ongoing service. You can monitor and improve your credit profile on your own with a little effort. Making sure your information is correct can save you money, help you get a better job and avoid identity theft.
Tom Roberts, financial planner and owner of A New Approach Financial Planning in Lakewood Ranch and Sarasota, can be reached at (941) 927-9590 or by email at Tom@ANewApproachFP.com.