Say goodbye to piggybacking credit histories. Fair Isaac, the developer of the FICO score, has announced plans to implement a new scoring algorithm that will no longer take into account the practice known as piggybacking. This is when someone with people with great credit histories "rent" their credit history to others who need some seasoned credit on their files to boost their own scores. This is done by adding the credit seekers as authorized users on their cards, which in the eyes of the credit bureaus gave you more seasoned, better rated credit, thus resulting in better scores for the applicant.
This has been used in the past by individuals with either no credit of their own, or a spot or two, to create a history that would enable them to procure credit. Students just out of school who didn’t ring up huge credit card bills while there often would have their parents add them to an account; no more. Starting in September one of the big three credit bureaus, Experian, TransUnion or Equifax (no one knows which one yet) will start this new practice, with the others joining ranks sometime in mid-2008. For more ideas on how you can build good credit without this practice, read Sandra Block’s article in USA Today. She shares some good ideas!
[widget:ad_unit-1221255277]You’ve heard some of the horror stories. Maybe actually heeded the warnings and put some more safeguards into place. God forbid you’ve been a victim, but identity theft plagues more than 10 million people suffering more than $5 billion dollars of loss. And it’s not just the monetary loss. There’s the countless hours of reinstating, recreating, reconstituting your life that can takes years, and still not be the way it was before. Identity theft is a very real threat, and one of the worst damages it can perpetrate is on your credit score.
Most identity theft involves financial theft using your data, and when this data gets updated by the lenders your credit reports will show a lot of new and interesting entries. This is the major reason why you should check your credit reports at least once a year. The credit bureaus report these items, many of which end up going into collections, and your credit score takes a major ding.
Cleaning up this mess is a nightmare. It can literally take months and years to get the lenders to fix these fraudulent charges, and all the while, your credit score has become a pariah. There are some things you can do to protect yourself.
Protect you social security number. Don’t give it to anyone who doesn’t have a legitimate reason for needing it, and don’t carry it in your wallet or purse; likewise, your passport. Keep the information on your checks brief; name and address. Shred any sensitive information, like old credit card bills and anything else with identifying information on it, and also any unwanted credit card offers that come in the mail. Never give out personal information over the phone; it could be anybody and you have no way of knowing. A legitimate company you are doing business with will not be doing business this way. Review your credit card bills carefully each month and make sure you don’t use your personal mailbox on your curb to place outgoing bills into. This is a favorite among identity thieves. On the internet try to stick with one credit card if possible for all internet transactions, and look for digital safety certificates like Verisign and Trust-E for compliance with standard internet safety procedures.
If you do become a victim, contact the police to initiate a crime report immediately. Many of the credit card companies will require this anyhow to know that a crime has occurred. Call your credit card companies to close the offending accounts and request new accounts and numbers. Make sure it is noted that the account is "closed at the customerís request". Then call the credit bureaus, (all three of them) and report this to the fraud units. This will get the ball rolling.
Don’t be dismayed if it takes some time to fix this. The best defense is a good offense. Do everything in your power to protect your information, and you’ll more than likely be passed over for an easier target!
[widget:ad_unit-1221255277]You’ve just ordered a copy of your credit report and are scanning it when you discover numerous entries you thought were dead and gone. Accounts that were closed, payments marked as late that were actually not, even amounts of credit outstanding that are wrong. Unfortunately, according to a 2004 study, up to 25% of credit reports had inaccuracies in them serious enough to get someone a denial of credit. This inaccurate information may reflect badly on you in the eyes anyone who might be looking at this report to evaluate you for a loan. These errors can lead to your credit score being less than it should be, as the score is calculated from this data. You’ve got errors and, like small pesky rodents, they are not easily eliminated. Let’s look at ways to go about clearing up errors in your credit report, which in turn will help boost your credit score.
First, realize that this is serious business, and treat it as such. Be incredibly organized, document everything. If in the worst case, this dispute became a legal one, being able to produce massive notes and documentation can only help you in a judge or jury’s eyes. Note the day, time, and person you talked to and any information they give you about their position or department. Then detail the contents of the call or conversation and either record it in a day planner, computer, or even a free website, whatever you feel most comfortable with. The point is, record it! Do it on the day it occurs to make sure you have every detail fresh. If you wait a few weeks not only will you risk not remembering details, a court may even label this as hearsay, as you wrote it down long after the fact.
Make sure your behavior is polite and impeccable. You may be "mad as hell and not going to take it anymore", but don’t let that come through in conversation. Especially don’t threaten a lawsuit; that is why you hire a lawyer if it comes to that.
Make sure you are contacting the right person. Generally you’ll be in contact with a credit reporting agency, not the creditor. They are the ones with the responsibility to clear up the errors, not the creditors. Try to get names and when you mail your correspondence, the consumer protection laws require that you do, send the letters certified and make sure to save a copy for yourself. Again, the tenor is polite, and businesslike; you’re simply trying to correct some errors on your credit report that are affecting your credit score.
You should utilize both the phone as well as written correspondence in your quest to fix these errors. Get something in writing when a creditor tells you they will rectify an error: usually this means requesting a Universal Data Form (UDF) which tells the world about the error.
Fixing errors in your credit report isn’t rocket science, but it does take some time and require you to be businesslike and thorough. Do that you have a great chance at success!
[widget:ad_unit-1221255277]Your credit files contain much sensitive information about your financial life, and of course all of us want to keep that as private as possible, and to prevent things like identity theft, asset loss and many other maladies that seem to pop up every day. One of the best ways to protect the information in your credit files is to be aware of your rights regarding your credits scores and reports. You should also know what you can do when you think you’ve got a problem. Let’s look at some of your key rights and protections.
The major right available to you is the ability to see your credit score in the first place. For many years your score was unavailable to you, known only to those making important decisions about you financial life! Thankfully that all changed a few years ago, when legislation changed the atmosphere regarding what you can and cannot see. Most notably, the Fair Credit Reporting Act (FCRA) has dramatically changed your rights about who has access to your sensitive information, and how that information can be used.
Some of the more pertinent pieces of that law include:
Providing your credit report to you – The credits reporting agencies (CRA’s) are now required to give you the information in your file if you ask for it. You can receive a free credit report each year, simply by asking.
Limit Access – They may not give your files to someone who doesn’t have a legitimate reason to see it, such as for a loan, etc.
May not give it to your employer – Without your permission.
They must investigate errors – If you let them know about errors in your files, they are required by law to investigate the discrepancy.
Correct or Delete Bad Information – If there are indeed errors, they are mandated to remove these from your files.
Get Rid of Old Information – If the information there is more than 7 years (or sometimes 10) , they are supposed to delete it.
Take you off marketing lists – Your information is valuable to others. They can make money selling it, so they are required to remove you from the lists if you so desire.
Take measures to protect and remedy Identity Theft – If this takes place, the CRA’s are supposed to help you in restoring your credit files.
Initiate a security freeze – In certain states you’re allowed to "freeze" your credit files, making them unavailable to anyone without your permission.
These are some of the important rights available to you under the Fair Credit Reporting Act. Making sure you know your rights can be a great first step in protecting your sensitive and valuable information. Always err of the side of caution when dealing with your information. Know who has your info and precisely why. Review your reports periodically, and you’ll be well served in the long run!
[widget:ad_unit-1221255277]Are you wondering what your FICO score is but don’t really want to pay one of the credit check services to find out? If so, check out the FICO Score Estimator from myFICO. It won’t give you an exact number, but you’ll get a pretty accurate range where your score would fall.
You can try it out here: FICO Score Estimator
(If you don’t know what your FICO score is, check out our article about understanding your credit score.)
