this is blatantly taken from another web site about credit ratings. It is in regards to inquiries about credit ratings reducing your rating – it turns out that it does, if there are more than 2 requests in a 60 day period it will affect your rating, but that this effect will expire after 12 months. I didn’t realize that it can happen, until Dave mentioned it.
Types of Credit Reports
One of the most confusing aspects of the credit reporting industry is the different type of credit reports that are issued. Adding to that, it seems like every credit report provider uses a different layout style. Some are much harder to read than others. But basically, they are providing a lot of the same information, one way or another. Once you get used to them, you can pretty much figure out what any different one is actually reporting.
Consumer Reports
A basic consumer report is what an individual gets when he orders up his own credit history. Generally he can order the credit report from his local credit bureau, or if he prefers, he can order the report from one of the Big Three. The cost for these reports ranges from $8 to $15 dollars, unless you have been recently turned down for credit. In that case, the bureau that issued the credit report that led to your rejection has to provide you with a free copy of your report – if you make a written request within 60 days of being rejected for the credit application in question. The basics of consumer credit reports are your name, SSN, address, and sometimes DOB. Most will generally provide some employment history at the end of the report.
The report will list all the credit accounts that you have under your name, IF all those creditors report to a bureau that feeds into The Big Three repository that is supplying the information on the report. These accounts include any joint accounts you have with a spouse, and any accounts where you are a cosigner for someone else’s credit account.
The account history will usually include an abbreviation for your account number. Many times the creditor’s name is abbreviated too, so sometimes it is difficult to determine who it is that is listing your account. If you can’t figure it out, you can be pretty sure that a loan officer can’t either, particularly if it is a merchant who is regional, rather than national.
The credit report will generally show when the account opened, what kind of credit account it is (mortgage, installment, revolving) what the credit limit is, what your current balance is, what kind of payment history you have had on the account, the date of last update from the creditor providing information on that account, and how many months it has been rated on the repository’s credit file for your history.
When you get a consumer credit report, you will usually get a set of instructions telling your how to read that report. It will explain to you that an R-1 rating means that it is a revolving credit account, and that you have never been late on that account. An R-2 rating means you have had a 30-day late. If you see the number repeating several times on that accounts listing, it means you have had several payments 30 day late. An R-3 rating means you have a 60-day late, an R-4 rating means a 90 day late or greater.
In a similar vein, an I-1 rating means you have a clear payment history on an installment account, and an M-1 rating means a clear payment history on a mortgage account. Some reports show the payment history next to the account or right below the name of the creditor, like this – 111112111111113211. Or it might have C’s in place of the 1’s. What that indicates is that the account is current the last five months, it had a 30 day late six months ago, and there was a 60 day late 15 months ago, preceded of course, by a 30 day late the month before that. Obviously, you can’t be 60 days late until you have a 30-day late!
Keep in mind that it does not matter whether you are 30 days late on making the payment. What the report is saying is that you make monthly payments on that account, and you were late on the payment. If the account is due on the first, and you pay on the 2nd, that payment is considered 30 days late. It affects your credit the same. There are exceptions of course. Most states require institutional mortgage lenders to give you a 15-day grace period. As long as you pay by the 15th, your credit report won’t show a late on a mortgage. However, if you pay on the 16th, you have a 30-day late on that account. And likewise, a 60-day late doesn’t necessarily mean you are 60 days behind. It means you were or are now late, and owing for two payments.
Late pay reporting is strictly the call of your creditor. Sears for example, will usually report you as late if your payment is not in their hands on the due date. A lot of credit card issuers will usually not report a late if they receive the payment within 2 or 3 days of the due date… but most will still bang you for whatever their late penalties are.
Some creditors are poor at reporting late pays, and it can lead to them being booted out of the credit reporting system, because they are sabotaging the system for other creditors who are relying on the credit reports to make informed decisions.
Also, many sub-prime lenders don’t report your mortgage history or rating, because they don’t want your good payment history on their loan to qualify you for a possible refinance to a lower interest conventional loan.
Most account listings will stay on your history for at least 10 years from the date that you made your last payment on that account. An exception is any derogatory history (explained in Credit Profiling below). Different types of “derogs” have some different periods of time for coming off the report. It is an historical record of your account, so catching up doesn’t get a late off of your report. It shows you were late, and then caught up… and that’s your credit history.
Merchant Reports
Many merchants will get the same kind of report that a consumer does, especially if they are just ordering single file reports from local credit bureaus. These are often the kind of reports that small local businesses, and smaller local landlords, will pull on you.
Most creditors and lenders, however, now use the “FICO” type scored reports, which give more detailed breakdowns, and use a “credit score” point total to indicate credit rating (see The Scoring Models below). In addition, they are generally easier to read. Usually, the report will list late payments by date.
Many creditors now use what is termed “FICO Driven” underwriting, using only the score to make a credit approval decision, without regard to the credit profile. The creditors using these types of credit reports pay a little extra for the scoring process. Depending on the merchant and what their underwriting guidelines are, they will order a single report, a dual merge, or a triple report report… pulling the credit information on a borrower from one, two, or all three repositories.
Standard Factual Reports
For years, this was the credit report typically used by mortgage lenders for real estate loans. This type of credit report is the most expensive and the most detailed. Generally, the larger contract credit providers prepare the standard factual report. They first pull a triple report credit report using all of The Big Three repositories. Then their local employees go to work checking title records, courthouse records, employment records, vital statistics records, and so forth, to make absolutely sure they have as complete and updated credit report as possible. Then they put all of this into a single credit report that is issued to the mortgage lender who ordered it.
With the advent of the FICO scoring systems over the past nine years, the use of the standard factual credit report has declined for many types of mortgages. It is still required for most conventional FNMA/FHLCM loans (especially those requiring PMI), and most FHA/VA loans. However, most sub-prime lenders, and lenders doing 2nd mortgages, now only require a triple report credit report to underwrite a mortgage loan transaction.
Your Credit: Here are some important facts to understand about credit reports:
1) Consumer’s don’t have access to merchant or standard factual credit reports. The different reports can be a problem sometimes if a consumer pulls his credit report, while a lender pulls a scored model, which has a lot more information on it. Many consumers have a difficult time understanding that the creditor probably has a more accurate report.
2) Consumers often wonder why a creditor won’t accept a consumer’s recent credit report that the consumer just pulled, so the consumer doesn’t have to pay the lender another credit report fee. The three primary reasons are; a) that a lender has to protect himself from possible investor lawsuits by pulling the lender’s report directly, b) the lenders are usually getting a more accurate credit report, and c) if they are using the scoring system, they are ordering a report which is already scored so they don’t have put the effort or time into the scoring the credit report.
3) Inquiries can lower your credit score, but only if you authorize the inquiry. For example, if you get one of those “pre approved” credit card offers in the mail, the issuer bought a list from a credit provider. The credit provider did not provide them with your credit report; they only put your name on the list that met the issuers’ parameters for that particular promotion. If you pull your own credit report, the issuer’s request will show as an inquiry, because federal law requires that you have notice of anyone who has received ANY credit information about you. However, this type of inquiry does not count against your credit score, and it will not show up on any credit reports that merchants’ or other creditors’ pull up on you.
If you take the offer though, and return the application form, you have just given the credit issuer the authorization to pull your credit report. Now the inquiry will show up on your credit history. But it won’t automatically lower your credit score. The scoring matrix only reduces the score if you authorize more than two credit inquiries within a 60-day period. The reality is, you could have as many as 13 inquiries on your report during a year’s time, and if they were spaced properly, they would not affect your credit score. By the way, inquiries drop off after 12 months time.
4) Paying your bills on time will improve your credit score, paying your bills even one date late will damage your score if reported, and habitual late payments will seriously erode your credit score. Late mortgage payments can quickly destroy your ability to borrow money anywhere.
5) When you cosign for someone else’s credit, you are pledging your credit on behalf of that individual. There is a reason for that. The person you are pledging for doesn’t meet the credit criteria to stand alone on the account. If that account develops bad history, it becomes your history. You agreed to make sure that the account stayed in good standing; from the minute you put your name to the credit agreement. For all intents and purposes, that account is your account now, and if it goes bad, your credit will suffer for it.
6) Loan officers and credit managers have nothing to do with an individual’s credit report. They only know what your credit report tells them, not how or why it got there. If the report as written disqualifies you for a particular loan, then you need to apply for a different loan program, or fix up your credit report. Usually you will pay a higher interest rate under those circumstances, if you are able to qualify for any loan.
7) If there is inaccurate or incorrect credit information on your credit report that is damaging your credit rating, YOU have to take the appropriate action. Using the telephone is not adequate. You must write a letter to the account in question explaining the problem and asking them to remedy it immediately. At the same time, you should mail a letter to the credit repository (or all of them) that supplied the credit information, disputing the erroneous credit entry. Send the repository a copy of the letter that you sent to the creditor, and any supporting documentation that you have. The creditor may or may not take care of the problem. But, once you notify the repository IN WRITING, federal law requires that the repository make an inquiry to the creditor in question, within 30 days. The creditor then has 30 days to provide documentation to the repository, or the disputed information automatically comes off of the report. Either way, you will receive notice within about 10 days from that time as to the status of that account. Usually, things move faster that this, but not always.
If the information stays on your report, one of three things has happened. Either the creditor has documented their claim to the repository’s satisfaction, you did not provide adequate documentation that the derogatory information is incorrect, or you did not properly dispute the claim.
There is one other possibility – identity theft. If you are a victim of identity theft, you probably are in for a lot of anguish and a long nightmare trying to clear your credit. But, if you don’t do it, nobody else will!