Credit Score Calculation & FCRA Information

Credit Score Calculation FCRAHow credit scores are calculated:

Your credit score calculation and FCRA information are based on your credit report, which contains a summary of your credit history. Your score reflects the level of risk you pose to potential lenders and therefore impacts whether you are offered credit in the future, as well as the associated interest rate. Below are the main areas that contribute to your credit score.

Your Payment History: The presence of late payments on your credit report will negatively impact your score. The magnitude depends on how late they were, how long ago the late payment occurred, and the total number of late payments on your report.

Amounts Owed: Your total amount of debt plays a significant role in determining your credit score. Your ratio of debt to credit is also important, with a lower ratio corresponding to a better/higher credit score. The amount of your available credit that you are using (credit utilization ratio) is another factor that falls under this category.

Length of Credit History: A longer credit history generally means a better credit score. The score also factors in the lengths of specific credit accounts and how recently they have been used.

New Credit: Opening several credit accounts in short amount of time can lower your score.

Credit Mix: The different kinds of credit you have will impact your score (retail accounts, mortgage loans, other loans). More types of successfully managed credit corresponds to a higher score.

Together, these factors paint a picture of the risk you pose to potential lenders. The exact calculation of your score varies depending on the credit-scoring company.

Your rights under fair credit reporting act:

It is important to be aware of your rights under the Fair Credit Reporting Act, which “promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies” (FTC). To summarize:

  • You must be told if information in your file has been used against you, such as to deny an application for credit, insurance, or
  • You have the right to know, request, and obtain all the information about you in the files of a consumer reporting
  • You have the right to ask for a credit
  • You have the right to dispute incomplete or inaccurate
  • Consumer reporting agencies must correct or delete inaccurate, incomplete, or unverifiable
  • Consumer reporting agencies may not report outdated negative information (this generally refers to negative information that is more than seven years old, or bankruptcies that are more than 10 years old).
  • Access to your file is limited to people with a “valid need” (i.e. to consider an application with a creditor, insurer, employer, landlord or other business).
  • You must give your consent for reports to be provided to employers.
  • You may limit “prescreened” offers of credit and insurance you get based on information in your credit
  • Consumers have the right to obtain a security freeze, which will prohibit a consumer reporting agency from releasing information in your credit report without your express
  • You may seek damages from
  • Identity theft victims and active-duty military personnel have additional

 

Sources: FICO, Forbes, FTC

To learn more about Credit Score & FCRA information, contact Eric Lindh Foster, LLC, today!