Category: Credit Score

Discovering that someone else is opening accounts with your personal information is terrifying. All of a sudden, bill collectors are coming to you, thinking you owe them money that you had nothing to do with. What are the steps to take if your identity is stolen?  Identity theft can lead to a lower credit score, loss of income, and difficulty getting approved for housing, loans, and more.  Thankfully, there are systems set up to help people that experience this stressful situation. The government, law enforcement, and credit agencies are ready to help identity theft victims.    What is identity theft? Identity theft is a crime in which someone uses another person’s personal identifying information such as name or social security number to commit fraud.  This can look as small as someone using your credit card information to purchase things without your permission or as grandiose as taking out major loans with your personal information.  It is illegal for someone to use another person’s personal information as their own. It’s not only theft, but it is also fraud.    Steps to Take if Your Identity Is Stolen  If you are a victim of identity theft, it might affect your credit score and even cost you money. These are the steps to take if your identity is stolen.    1. File a Report With the FTC The very first thing you should do is notify the Federal Trade Commission (FTC) that you are a victim of identity theft. The information you give them can be utilized by the FBI and local law enforcement agencies to pursue criminal charges.  Plus, when you file a report, the FTC has a plethora of helpful information that will tell you what you should do next.  Go to Identitytheft.gov and fill out a complete report. After you submit it, they will even give you pre-written letters that you can use to file police reports. They also have information on how to dispute fraudulent charges.    2. File an Identity Theft Claim If you have identity theft insurance, then you might be entitled to compensation, especially if you lost wages or you need funds to pay for a notary or public records searches fees.  Major insurers such as Allstate or State Farm offer identity theft insurance. Or, you can purchase insurance from companies like LifeLock or Sontiq.  Is identity theft insurance worth it? Speak with a financial advisor after looking at some of the most popular plans. Some plans won’t cover loss of money from a bank account and others have high deductibles, so it might not be a good idea for everyone.    3. Contact the DMV and IRS  Once identity thieves have your personal information, they may be able to obtain personal identification with it. Contact your state’s Department of Motor Vehicles and ask them to place a flag on your license number. This will also help law enforcement when they are attempting to track down the guilty parties.  You should also reach out to the Internal Revenue Service to make sure you aren’t a victim of tax-related identity theft. For example, someone might be trying to use your information to receive a tax refund.    4. Contact Credit Reporting Agencies Even if identity theft hasn’t affected your credit yet, you should still put a credit freeze in place. Let them know if there are any fraud alerts connected to your personal information.  Reach out to at least one of the three major credit agencies, but all three are best.  The three major credit reporting agencies are Equifax, Experian, TransUnion.  A fraud alert lasts one year. This prevents someone from opening new accounts using your social security number or other personal information. You can still open an account, but you’ll have to verify your ID before they can issue credit.  You can also request an extended fraud alert that lasts seven years. If you request a credit freeze, you can lift it at any time.  Here is the full contact information for all three credit bureaus.    Equifax Alerts 800-525-6285 Equifax Consumer Fraud Division P.O. Box 105069 Atlanta, GA 30374 Experian Fraud Center 888-397-3742 Experian P.O. Box 9554 Allen, TX 75013 TransUnion Fraud Alert 888-909-8872 TransUnion Fraud Victim Assistance Department P.O. Box 2000 Chester, PA 19016   5. Notify Local Law Enforcement  Finally, you should contact your local law enforcement and notify them about your identity theft. Filing a police report is the first step to being able to arrest and prosecute the thief.  Ask for a copy of the report that you can keep in your records. Do this as soon as possible, so if your information is used after you submitted the report, you have a paper trail proving it wasn’t you.  When it comes to catching criminals, local law enforcement can only arrest people in their jurisdiction. If your identity was stolen by someone overseas or in another state, your police report can be sent to the FBI if the fraud warrants their involvement.    Prevent Identity Theft  Nobody wants to be a victim of identity theft and there are a lot of steps you can take to prevent it. Monitor your credit closely - the sooner you catch any type of fraudulent activity, the less loss you could suffer.  Contact a financial advisor in Eau Claire, WI to discuss any risky activities you might be doing and how to protect yourself from possible identity theft. Whether that means using a VPN when you are using public Wi-Fi or setting up identity insurance, a financial advisor will help you make smart decisions to protect your credit and personal information. 

Without even knowing it you might be doing things that are damaging your credit score, which affects your ability to get credit and the interest rate you pay when you do get credit. A 2014 survey by Credit.com found that consumers sometimes don’t understand which actions will and will not help them improve their credit scores. To take the right steps to boost your score, you need to start by understanding the basics of credit scores. The FICO credit score is the most widely used score in lending decisions and ranges from 300 to 850. A FICO score of 750 to 850 is considered excellent, and those with a score in that range have access to the lowest rates and best loan terms, according to myFICO.com, the consumer division of FICO. A score of 700 to 749 is good, and those with a score in this range will likely be approved for loans but might pay a slightly higher interest rate. A score of 650 to 699 is considered fair, and those with a score in this range will pay higher rates and could even be declined for loans and credit, according to myFico.com. The three credit bureaus – Equifax, Experian and TransUnion – also have created the VantageScore, which ranges from 501 to 990, and the VantageScore 3.0, which ranges from 300 to 850 (to mimic the FICO range). The VantageScore is growing in popularity among lenders but still isn’t as widely used as the FICO score. No matter the name, scores can vary by credit bureau depending on when the score was calculated and what specific method was used to make the calculation. Each credit bureau has its own formula. Once you know your score, you can start taking the right steps to improve it. To do so, follow these six habits of people with excellent credit scores. 1. Pay on time. Payment history is the top factor in most credit scoring models, says Gerri Detweiler, director of consumer education at Credit.com. So payments that are 30 days or more late can quickly drag down your credit score. And one late payment is enough to hurt your score, she says. According to myFICO.com, 96% of consumers with a credit score of 800 pay credit accounts on time; 68% of those with a score of 650 have accounts past due. Even if you can only afford to pay the minimum, always pay on time because that will have a bigger impact on your score than the amount you pay, Detweiler says. Set up automatic bill pay through your credit account or bank account so you don’t miss a payment. 2. Minimize use of available credit. Usually, the second most important factor in your credit score is how much debt you have compared with the amount of available credit you have, Detweiler says. Those with a credit score of 800 use only 7% of their available credit, on average, according to myFiCO.com. But most consumers with a score of 650 have maxed out their available credit. You can see a significant increase in your credit score shortly after you pay down highly utilized credit accounts, Detweiler says. If your credit cards are maxed out and you can’t pay them off quickly, she recommends consolidating your balances with a personal loan from a bank because the so-called credit utilization ratio (total credit balance divided by total credit limit) for those loans isn’t calculated in the same way and doesn’t weigh heavily on your score. 3. Maintain low or no balances. People with excellent credit almost always keep low balances on their credit cards, and often don’t pay interest because they pay their balances in full every month, says Jason Steele, a credit card expert for CompareCards.com. In other words, they only use cards for things they can afford to pay off with cash, he says. To become disciplined with credit and avoid racking up balances, Steele recommends logging into your credit account online after making a purchase to pay it off.  4. Have a lengthy credit history. Those with a credit score of 800 have an average account history of 11 years (with oldest account opened 25 years ago) versus an average account history of seven years (with the oldest account opened 11 years ago) for those with a score of 650, according to myFICO.com. So opening several new accounts at once can shorten the average age of your credit history, Detweiler says. And closing old, inactive accounts also can hurt. This move can increase your credit utilization ratio since closing an account means you no longer have access to that available credit. 5. Only apply for credit when necessary. It’s important to have a healthy mix of lines of credit, including credit cards, auto loans, mortgages and even personal loans, Steele says. This shows that lenders are willing to trust you with their loans. And the more available credit you have, the lower your credit utilization ratio will be, he says. But that doesn’t mean you should apply for every line of credit you’re offered. Multiple inquiries from lenders for your credit reports in a short period can trim your score, especially if you don't have many credit accounts or you have a short credit history. Be especially careful when car shopping because Detweiler has heard lots of complaints from consumers whose scores dropped when they had several dealers pulling their reports for financing options. Rather than let a dealer shop your credit, choose a lender you like beforehand and get pre-approved for a loan. 6. Choose credit cards carefully. People with excellent credit usually get the best credit card offers. But they’re smart about the cards they choose. For example, even though retailers often offer discounts on purchases when you sign up for their credit cards, these cards often have low credit limits, which can hurt your credit utilization ratio if you carry a balance on those cards. Cards with annual fees also should be avoided, Steele says, unless they’re packed with benefits -- such as cash-back rewards and miles that can be redeemed for travel – that outweigh the fee. Those who are smart with credit look for cards that waive that fee for the first year then re-evaluate the card in the second year to see if the benefits outweigh the fee, Steele says. It’s also smart to look for cards that offer a 0% interest rate for the first year, he says. Source: Kiplinger

Your credit score—the three-digit number that creditors use to evaluate the risk when they lend you money—helps determine which loans or interest rates you qualify for and how much you’ll pay. Landlords, utilities and cell-phone companies may also check your score before doing business with you. Dozens of credit scores may be attached to your name, including versions tailored to specific industries, such as auto lending. However, the two big consumer credit scoring models—FICO (which is used by the majority of lenders) and VantageScore (a newer model created by the three major credit bureaus)—value similar behaviors when calculating your score, even if they weight those factors differently. Both grade your creditworthiness on a scale of 300 to 850, with a score of 750 or above generally considered good enough to qualify for the best rates. On-time payments. Both FICO and VantageScore prize on-time payments above any other factor. As long as you pay at least the minimum due each month, your payment history will stay clean (though you will rack up interest on your balance). Lenders typically don’t report a late payment to the credit bureaus until it’s more than 30 days overdue. If you make a late payment, it won’t haunt you forever: The impact on your credit score will diminish as long as you consistently pay your bills on time. Limits on your credit usage. Your credit utilization ratio is the amount you owe on your credit cards as a proportion of the total limit on each card, as well as the total limit for all of your cards in aggregate. VantageScore advises consumers to keep their utilization ratios below 30%, but “the lower the better,” says Barry Paperno, who answers credit questions at his website, SpeakingOfCredit.com. He suggests aiming for a utilization of 1% to 9%, rather than zero, because you can pick up a few more points by showing you are managing your credit well. You can improve your utilization ratio by spending less on your credit card and by asking your issuer to raise your limit. Applying for a new card would also increase your available credit (but having too many accounts showing balances can lower your score). Most credit card issuers report the balance from your monthly statement to the credit bureaus. To make that balance appear lower, dole out a few mid-cycle payments or pay off your bill shortly before the closing date for your monthly statement. A long track record. This slice of your score considers the age of your oldest account and the average age of all your accounts. Opening new cards may improve your credit utilization ratio, but it also lowers the average age of revolving accounts, which lowers your score. Note that a closed account in good standing remains in your credit history for 10 years, so you’ll benefit from your track record; however, keeping no-fee credit cards open (and using them now and then) is smart to help your utilization ratio stay low. Other factors. A mix of revolving and installment loans also boosts your score. But don’t overdo it when applying for new credit. Having “hard inquiries” on your credit report from potential lenders will temporarily shave points from your score. When you’re shopping for a mortgage, student loan or auto loan, inquiries made within a certain time period, typically between two weeks and 45 days, count as one inquiry. Source: Kiplinger