Extension Report

Baldwin County Extension Office

302A Byrne Street

Bay Minette, AL  36507

Rick Zapata

Regional Extension Agent

Consumer Science & Personal Financial Management

October 13, 2009

There are several programs out on the market today that promise to repair your credit score or credit history for a fee. Most of these companies actually offer little or no actual service for a fee. A few of these are actual scams that the consumer needs to avoid at all costs. If you are tempted to use one of these companies, just remember this: Negative information reported to the three credit reporting agencies will stay on your report for seven to ten years (no exceptions for accurate information). No one can remove “accurate information” from a credit file before its reporting life ends. You can have “inaccurate information” removed yourself for free.

If negative information is on your credit report that does not belong to you, you can dispute it by simply writing a letter to the credit reporting agency. Then they will have thirty days to respond to your dispute. You can also have information posted on the credit report that explains any discrepancies that you would want someone to consider. Again, this service provided by the credit reporting agency is free for you to use, you don’t have to pay someone to do this for you.

Each of the three major credit reporting agencies gives you a credit score. The most common score is known as FICO. A low score would be 300 and a high score would be around 800. This score not only determines the amount of credit that can be given to you but it also determines the amount of interest that the creditor will charge you. Just a one percent increase in interest on a thirty year mortgage could mean thousands of dollars in interest costs to you. There is also another new scoring system called Vantage Score. This score is based with a letter system like a report card (ABCDF). One thing that the credit reporting agencies do not reflect is the cause(s) that made someone late on their payments. For instance, if someone is laid off from their job they may go through a period where bills exceed income. Unemployment checks usually do not replace a person’s usual income. This person’s late payments are not caused by neglect and should be scored differently from someone who just won’t pay their bills on time. In the unemployed case, they can have a letter attached to their report stating the reason for their late payments.

The three major credit reporting agencies gather information about you from the people that you have credit with now and in the past and various public records. Most of your creditors report your payment history every thirty days. Around 35% of your credit score is based on your payment history (late, slow, or on time), paid off debts, debts placed in collection accounts, tax liens, judgments, and bankruptcies. The amounts that you owe make up about 30% of your score along with the remaining credit available on each account. The length of your accounts makes up around 15% of your score. The longer that you have had an account usually the better the score will be. New credit inquiries make up 10% of your score and the types of credit make up 10% of your score.  For instance, loans from finance companies will have less of a score than if you were to borrow from a bank or credit union.

Most people just become concerned with their score when applying for credit; however that is not the only time that your credit score will be important.  Many potential landlords now check credit histories before renting a home. Some phone and utility companies check credit reports and may require a larger deposit based on your credit history. Many employers are now checking credit histories prior to employing someone.

You can go on the internet to www.annualcreditreport.com to get a free credit report or you can call 877-322-8228 to request a mail in form for the free credit report. If you want your credit score, that will cost extra. When you get your report, look for items posted that do not apply to you. For instance, if they show you with a delinquent credit account write them a letter and dispute the entry on your account. Also, look for address listings where you have lived. If they show an address that you have not used or credit cards that you do not have, someone may be using your identity without you knowing. If you need help with your bills or credit history call the Consumer Credit Counseling Service in Mobile at 251-602-0011. They can help you get on a plan to repair your credit and while this will not happen overnight they can get you started on the right path.

Email address: rrz0001@aces.edu

Phone: 937-7176 or 943-5611, 928-0860, ext. 2222

The Alabama Cooperative Extension System (Alabama A&M and Auburn Universities) in cooperation with the U.S. Department of Agriculture is an equal opportunity educator and employer.