Credit Reports 101 - New York Universityweb-docs.stern.nyu.edu/admissions/financial-aid-chase... · 2011-11-04 · Credit Score Your credit score is a number that helps lenders determine

Credit Reports 101

Bill Bufkins, November 3, 2011

What is a credit report?

A credit report is a record of your past borrowing and repayment

activity.

The information in your credit report helps determine your financial

reliability.

Your credit report is continuously updated based on your borrowing and

repayment activity (such as student loans, credit cards, etc.).

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What is on a credit report?

Your credit report consists of four main sections:

1. Personal/Consumer information

2. Account history information

3. Public information

4. Inquiry information

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Personal/Consumer Information

Personal information in your credit report includes:

• Name

• Social Security Number

• Date of birth

• Current and past addresses

• Current and past employers

• Consumer statements

(can include explanations of why a negative item appears in your report)

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Account History Information

• Account name and number

• Type of account

• Real estate (home mortgage)

• Revolving accounts (credit cards)

• Installment accounts (student loans)

• Medical billing companies

• Utilities and cell phone providers

• Person(s) responsible for account (individual or joint)

• Date account was opened

• Individual account limits

• Balance

• Recent payments

• Past due amount and number of days past due

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Public Information

Public record information may include information such as:

• Bankruptcy

• Liens

• Foreclosures

• Accounts turned over to collections

Reports of items past due as little as 30-90 days can also appear in

your public information and create adverse credit history.

A public record can remain on your credit report for seven to ten years.

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Inquiry Information

The inquiry section includes details about who accessed your credit

report.

Soft inquiries

• Occur when you request a copy of your report

• Occur when existing lenders review your report

• Only show up on reports you request (lenders do not see them)

• Do not affect credit score

Hard inquiries

• Occur when you apply for credit or open an account

• Remain on your report for two years

• Too many can affect your credit score

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Sample Credit Report

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Sample Credit Report – Section 1

The actual credit report you

receive will be customized to

meet your specific request.

Sample Credit Report (continued)

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Sample Credit Report (continued)

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Credit Score

Your credit score is a number that helps lenders determine if you

qualify for a particular credit card, service or loan. Currently, the three

credit reporting agencies — Equifax, Experian and TransUnion — use

the Fair Isaac Corporation (FICO) score model, which calculates a

credit score between 300 and 850. Your actions are calculated into a

number to create your credit score. This is your ―grade‖ in handling

finances.

Your credit report does not include an actual score – each credit

reporting agency evaluates your history according to their own criteria.

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Credit Score

You’re more likely to get approved for a loan or credit card — and

receive a lower interest rate — if you have a higher score.

High credit score = lower risk to lender

As the information in your credit report changes, so does your score.

Be sure your credit report reflects a continuous payment history.

HINT: Make payments on time.

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How is a credit score calculated?

The exact formula of the FICO and other scoring models is a trade

secret. However, the Fair Isaac Corporation has identified five criteria

and their relative weight:

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What’s in your FICO® score?

Payment History • Account payment information on specific types of accounts (credit cards,

retail accounts, installment loans, finance company accounts, mortgage,

etc.)

• Presence of adverse public records (bankruptcy, judgments, suits, liens,

wage attachments, etc.), collections items, and/or delinquency (past due

items)

• Severity of delinquency (how long past due)

• Amount past due on delinquent accounts or collection items

• Time since (how recent) past due items (delinquency), adverse public

records (if any), or collection items (if any)

• Number of past due items on file

• Number of accounts paid as agreed 14

*Fair Isaac Corporation. ―What constitutes: Poor, Fair, Good, Excellent credit?‖ http://ficoforums.myfico.com/t5/Credit-

Cards/What-constitutes-Poor-Fair-Good-Excellent-credit/td-p/110271. (Accessed 04/11.)

What’s in your FICO® score? (continued)

Amounts Owed

• Amount owing on accounts

• Amount owing on specific types of accounts

• Lack of a specific type of balance (in some cases)

• Number of accounts with balances

• Proportion of credit lines used (proportion of balances to total credit

limits on certain types of revolving accounts)

• Proportion of installment loan amounts still owing (proportion of

balance to original loan amount on certain types of installment

loans) 15

*Fair Isaac Corporation. ―What constitutes: Poor, Fair, Good, Excellent credit?‖

http://ficoforums.myfico.com/t5/Credit-Cards/What-constitutes-Poor-Fair-Good-Excellent-credit/td-p/110271.

(Accessed 04/11.)


Length of Credit History

• Time since accounts opened

• Time since accounts opened (by specific type of account)

• Time since account activity

Types of Credit Used

• Number of (presence, prevalence, and recent information on)

various types of accounts (credit cards, retail accounts installment

loans, mortgage, consumer finance accounts, etc.)

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(Accessed 04/11.)


New Credit

• Number of recently opened accounts, and proportion of accounts

that are recently opened, by type of account

• Number of recent credit inquiries

• Time since recent account opening(s), by type of account

• Time since credit inquiry/inquiries

• Re-establishment of positive credit history following past payment

problems

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(Accessed 04/11.)

What is a good credit score?

The general guideline is that a score over 680 is considered

good or excellent.* However, lenders use various standards to

approve or deny credit.

According to the Fair Isaac Corporation, the median score in

the U.S. is 723.

It’s a good idea to obtain your current FICO score on a regular

basis so you’ll know where you stand with potential lenders.

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(Accessed 04/11.)

Why does a good credit score matter?

Your credit score can affect your interest rates on credit cards and

loans. Most lenders will look at all three FICO scores — one from

each major credit bureau — when evaluating your loan application.

In addition to giving you financial flexibility, a good score can be

important because:

• Landlords and mortgage lenders look for good credit scores

• Prospective employers often run credit checks to gauge

responsibility

• A good credit score can help lower your insurance rates

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How can I improve my credit score?

Raising your score after a poor mark on your report or when building

credit for the first time takes patience and discipline.

• Have credit cards, but manage them responsibly.

• Pay your bills on time. Late payments and collections can have a

negative impact on your score.

• If you do miss payments, get current and stay current. Older

credit problems count less, so poor performance won’t haunt you

forever.

• Check your credit report. Make sure there are no errors.

Fair Isaac Corporation. ―How to Repair Your Credit and Improve Your FICO Credit Score.‖

http://www.myfico.com/crediteducation/improveyourscore.aspx. (Accessed 04/11)

How can I improve my credit score?

(continued)

• Reduce the amount of debt you owe.

• Don’t close unused credit cards just to raise your score. Closing

an account doesn’t make it go away; it will still show up on your credit

report and may contribute to your score.

• Don’t open new credit cards just to increase your available

credit. This approach could lower your score because it can lower

your average account age.

• Paying off a collection account will not remove it from your

report — it will stay on your report for seven years.

• Contact your creditors or seek credit counseling if you are having

trouble making payments.

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Fair Isaac Corporation. ―Improve Credit Score: Tips to Fix Poor Credit & Raise Your FICO Score.‖

http://myfico.com/crediteducation/improveyourscore.aspx. (Accessed 04/11)

Request a Credit Report

It’s a good idea to check your credit report on a regular basis to ensure

the information is accurate.

Credit reports are issued by the three nationwide credit bureaus:

• Equifax

• Experian

• TransUnion

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You can request a free credit report annually from each credit bureau.

You’re also entitled to a free credit report if:

• You are denied credit, insurance or employment based on

information in your report (you must ask for your report within 60

days of receiving notice of the action).

• You are unemployed and plan to look for a job within 60 days.

• You receive public assistance.

• Your report is inaccurate because of fraud, including identity theft.

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Get a free copy of your credit report!

Use a centralized service to get your free annual copy from each credit

bureau at once, or spread them out throughout the year.

AnnualCreditReport.com

1-877-322-8228

Watch out for other Web sites that offer credit reports — they may

charge a fee.

AnnualCreditReport.com is the ONLY source for free annual credit

reports that is authorized by the Federal Trade Commission (FTC).

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Check Your Credit Score and Report

• Request your credit report and score from each bureau

• Look for incorrect information

• Names, addresses accounts, inquiry lists, etc.

• Contact the credit bureau directly to correct the problem

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Equifax Experian TransUnion

Equifax.com Experian.com TransUnion.com

1-800-685-1111 1-888-397-3742 1-800-888-4213

Why is this information important?

A basic understanding of credit reports and the information they contain is

valuable for many reasons.

• Your credit report helps determine if you will be approved or denied credit in

the future.

• Credit reports contain information that may affect the interest rates you’ll be

offered in future borrowing.

• Reviewing your report regularly and knowing your score helps prevent

identity theft.

• Periodically checking your credit report and knowing your credit score help

you stay in control of your finances.

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Sources: AnnualCreditReport.com; FTC.gov; MyFICO.com

Important Information: The articles contained in this publication are for informational purposes only and are

intended as resources for students to identify financial and other related information. Resources or Web

sites cited are provided solely as references to information on topics that may be useful, and Chase has no

control over the content in third-party resources. Chase does not guarantee the authenticity of these

documents and/or Web sites and is not implying any endorsement of or responsibility for the opinions,

ideas, products, information or services offered or representations made therein. © 2011 JPMorgan Chase &

Co. All rights reserved. The information contained within this document was current at the time of

publication. Contact Chase for current product information. (11-234) 06/11

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Credit Reports 101 - New York Universityweb-docs.stern.nyu.edu/admissions/financial-aid-chase... · 2011-11-04 · Credit Score Your credit score is a number that helps lenders determine

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