Posts Tagged ‘CREDIT SCORE’

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SWAMPED WITH FRAUD ALERT CALLS

September 12, 2008

All the three credit reporting agencies (Equifax, Experian, and Transunion) have been swamped with “Fraud Alert Calls lately after clients of the largest home mortgage company in the U.S., the Countrywide Home Mortgage Loans informed their clients by snail mail that their confidential personal data may have been compromised. It seems one of Countrywide’s employees who have access to the company’s confidential files, stole all information about its clients and sold it to a still undidentified third party. Included in the stolen information are sensitive information such as Social Security numbers, credit card numbers and expiry dates, birthdays and other pertinent information vital to any credit transaction. While the matter is still being investigated, Countrywide advised its clients to immediately inform any one or all the three credit reporting agencies to tag their accounts with a Fraud Alert. This is a free service provided by the credit reporting agencies to anyone who wishes to avail of it. The initial tag will stay for 90 days with an option for the client to extend it for the next seven years.

Simply put, the fraud alert is a notice attached to the client’s credit files. What it does is it informs creditors that the account may have been compromised and may possibly be used by identity thieves. So every time a client whose credit file has been tagged with a fraud alert avails of a credit facility like using a credit card or opening a new one or applying for any form of loan, the creditor is immediately informed of the delicate situation. Extra care is taken by the creditor who has the option to require the client for other proofs of identity. In the store front, if you swipe a credit card with a fraud alert tag, you will be required to produce other supplementary ID’s more than what is normally asked for. It is a preventive measure to avoid identity theft but may also cause some delay in credit processing. But hey, this is definitely better than having your card or your credit facility be used by thieves!

If you are one of Countrywide’s clients, you better make the call now! Countrywide Financial to which the Countrywide Home Mortgage is affiliated with, is a large conglomerate. They are into home mortgage loans, banking services, and insurance. We are not exactly sure whether the stolen information is limited only to clients of of Home Mortgage. There is a distinct possibility the guy may have hacked the whole caboodle of confidential information from the conglomerate. Besides, the fraud alert service is free!

Equifax
http://www.equifax.com/home/
Toll Free Number: 1-888-766-0008

Experian
http://www.experian.com/
Toll Free Number: 1 888 397 3742

Transunion
http://www.transunion.com/
Toll Free Number: 1-800-680-7289

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WE’VE BEEN SCORED!

August 30, 2008

(ABOUT CREDIT AND CREDIT SCORES)

Like a birth mark, each one of us has been tagged with a distinctive numbered marking called credit score! It is a tag that stays with us forever.

But unlike the real static birthmarks, this distinctive numbered tag called credit score is dynamic and changes over time. It depends entirely on our own individual credit histories (or how we manage our credit). Every time we apply for credit, like making a car loan, or a personal loan from a bank, or apply for a mortgage or a new credit card, lenders look mainly on our credit scores to determine the level of credit risks they will have to take with each of us before making their credit decisions.

What is a credit score?

Whether we like it or not, our credit history is being reported to and stored by three major credit reporting agencies in the United States (Equifax, Experian, and Transunion). Lenders who have extended credit to us provide these reporting agencies with details of our credit history such as the type of credit we’ve used, the length of time our account has been open, and whether or not we have paid our bills or not. These are incorporated into individual credit reports which also include information on how much credit we’ve used and other pertinent information like if we are applying for new credit sources.

In making credit decisions, lenders buy these reports from the three credit reporting agencies. However, based only on these credit reports, the credit granting process by lenders were quite slow, inconsistent, and oftentimes biased; up until the Fico Score (more popularly known as credit score) was invented.

Using data from our credit history (as provided by the three credit reporting agencies, which in turn is based on data provided by our lenders), a company called Fair Isaac Corporation (FICO) developed an objective scoring system using advanced math and analytics. The new scoring system allowed for faster credit decision making by lenders, in fact it now only takes seconds for credit decisions to arrive on line. The new system took away personal biases and opinions and made credit decision making fair and objective. On top of these, the new credit scoring system allows our past credit problems to fade away in time especially with the entry of new data showing improved payment patterns. These Fico Scores are now the most widely used credit scoring system worldwide.

The FICO® score is calculated by a mathematical equation that evaluates many types of information from our credit report in any of the three credit reporting agencies. By comparing this information to the patterns in hundreds of thousands of past credit reports, the FICO score estimates our level of future credit risk. Our level of future credit risk is then calculated and expressed as a number which ranges from 300 to 850 where the higher the score means the lower the credit risk and vice versa. However, while many lenders use the Fico scores to help them make their lending decisions, there is no set cut-off range or score for all of them. Each lender has his own strategy and sets his own cut off score based on the level of risk it finds suitable for his own credit product.

Here is the breakdown of how Fico score assesses the data from our credit report:

· Payment History 35%

· Amounts Owed 30%

· Length of Credit History 15%

· Types of Credit in Use 10%

· New Credit 10%

Please note that while Fico scores considers only the data contained in our credit reports, lenders may want to also consider other information before making the final lending decisions. The additional information may include our household income, the length of time we have worked at our jobs and the type of credit we are applying for.

It is important to regularly manage our credit health well and maintain a high Fico score at all times because the benefits are enormous such as getting better credit offers, lower rates of interests, and speedy credit approvals. So, if we are planning to make a major purchase such as buying a car on installment, or applying for a mortgage on a new home, it is best to check on our credit scores six months earlier to give us enough time to take actions to improve our Fico scores.

We’ve been scored and there’s nothing we can do about that but to maintain a healthy credit status!