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HSFPP Weekly Update # 216—Do You Have a Credit Report and Is It Accurate?

Message from Bob: As adults, you likely are aware of problems many consumers face with inaccurate credit reports. If it hasn’t happened to you, you might know of someone else who has had to straighten things out with the major credit reporting bureaus before being able to obtain credit. Or you have heard about the problem on the news and wonder how likely it is that you will be affected.

In today’s economy in which credit has tightened up considerably and is only available to those who have sterling credit records, it is more vital than ever that your credit records be correct and not have inaccuracies or omissions that could result in you being denied credit. Inaccurate information on your credit report could also result in you being denied housing or a job.

Most teens, however, are unaware of the issue. They are approaching adulthood, though, so they need to know what to expect. Those who are about to begin college or other postsecondary education could encounter credit card offers right away. There should be nothing in their credit reports to prevent their receiving credit, but mistakes happen. Identity theft is also a possibility, regardless of your age.

As long as they are 18, your students can inquire about their credit on their own. From what we have been told, those who are minors will need their parent or guardian to inquire in writing on their behalf. It’s never too early to check.

 

Academic Expectations:

Social Studies

Academic Expectation 2.18
Students understand economic principles and are able to make economic decisions that have consequences in daily living.
Unit 2-6

Practical Living

Academic Expectation 2.33
Students demonstrate the skills to evaluate and use services and resources available in their community.
Unit 5

 

Web Site Picks of the Week:

“Your Access to Free Credit Reports”

This publication from the Federal Trade Commission (FTC) shows why you should check your credit report for errors. It suggests checking every four months to make sure someone does not steal your identity.

Free Annual Credit Report

Consumers in the U.S. are entitled to a free annual credit report. Go to this site to request your credit report each year. You may request your free annual credit report from all three major credit reporting bureaus—Equifax, Experian, and TransUnion— all at one time, if you wish. However, if you spread out your requests to each over the course of the year, you can get a free annual credit report every four months. The free annual credit report is only available through this Web site. (From what we have been told, those of you who are under 18 will need to ask your parent or guardian to request your report for you, in writing. Regardless of age, do not share this private information.)

 

Additional Reading:

“New Report Reveals Industry-Wide Failures in Handling Errors in Credit Reports,” National Consumer Law Center

 

In the New$... Stay on Top of Your Credit

by Claire Kimberly, family studies graduate student, University of Kentucky

Everyone has a credit history that is reflected in a credit report. This week I decided to look at my own credit history and score which, luckily, did not surprise me. However, the credit report also shows who has viewed your report. The number of people who have looked at my information was shocking. I expected insurance companies and lenders to check my credit report, but I did not realize that employers and cell phone companies also have the right to see my information. Your credit report is important because it could affect not only loans you wish to take, but also where you are employed and what type of phone plan you are on. You could also be denied housing or be charged a higher rate if there is adverse information in your credit report. And you could be charged more for insurance.

If you’ve ever had a credit card, a car loan, or any other type of credit, your information is stored in the databases of the three major credit reporting companies, Experian, Equifax, and TransUnion. These companies collect personal and financial information from creditors, employers, and public records. The information is used to devise a credit score by Fair Isaac which ranges from 300 to 850. Both the history and the score are made available to potential lenders and can affect everything from whether you are granted a loan to the rate of interest you are charged.

A credit report is composed of several parts. The first part contains personal identification information such as name, address, and Social Security number. Another section covers public records, including court judgments and criminal actions. Credit accounts and payment history can be found in a third section.

Finally, even inquiries into your credit history will show up on the report. These will appear for one year. Credit reporting companies also keep a two-year record of all those who requested your credit history for employment purposes.

Most of the information stays in the report for seven years, though bankruptcy information remains a part of the report for ten years. Some facts, such as criminal convictions, can be reported indefinitely.

In 2003 Congress passed an amendment to the Fair Credit Reporting Act that requires each of the three national credit reporting agencies to provide one free copy of an individual’s credit report every 12 months. Consumers should see this as an opportunity to take charge of their financial health.

It’s important to check your credit history regularly for the simple reason that mistakes can be made and errors do occasionally show up in the reports. Identify theft is on the rise and keeping a close eye on your reports can also give you a much earlier indication of illegal activity under your name and guard against serious damage being done to your credit.

To order a free credit report, go to http://www.annualcreditreport.com and fill out the form. The form can either be submitted online or printed and mailed to Annual Credit Report Request Service, PO Box 105281, Atlanta, GA 30348-5281. You can also order a report over the phone by calling toll free (877) 322-8228. Also keep an eye out for misleading “free credit report” services that are provided by lenders. It is likely that their request form may actually be an application for credit that will end up on your credit report as an inquiry, not to mention setting you up for a barrage of solicitations for credit. For your free report you must use the Annual Credit Report Request Service.

Because each of the three credit reporting companies acquires information from a variety of sources, their reports may not be identical. For that reason, it is a good idea to check each company’s report. You can order all three reports at once; but, if you do, you will not be able to get another free report from these companies for one year. Therefore, it is recommended that you order a report from a different company once every 4 months. Spreading out your requests in this manner will keep you abreast of any errors or suspicious activity that may appear and will allow you to take the proper actions to remedy the problem before too much time passes.

Many young people will find that their credit report shows nothing in their credit history. There is nothing wrong with this. If you have not bought a car or applied for credit, there should be nothing in your credit history; if there is, and you have no idea what it is about, it could be a sign that someone has stolen your identity and applied for credit in your name. They could be making minimum monthly payments on a credit card account so you never receive a delinquency notice; or they might not be paying on the account, and the bills are being sent to a post office box that isn’t your current address, so you would never know without seeing your credit report. You also might find overdue library books, especially from a previous address; more and more, libraries are turning these over to collection agencies, who report the delinquency to all three major credit bureaus.

If, after checking your report, you find an error, contact the credit reporting company in writing, including copies of documents that support your position. The company must reinvestigate the questionable item within a reasonable timeframe – usually 30 days.

It doesn’t take much time, and checking your credit report on a regular basis can help you take care of problems before they affect your buying power or your employment status.

Sources: “Your Access to Free Credit Reports,” Federal Trade Commission, March 2008. http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre34.shtm

“5 People Who Check Your Credit,”  Kiplinger’s Personal Finance Magazine.  http://articles.moneycentral.msn.com/Banking/YourCreditRating/5PeopleWhoCheckYourCredit.aspx

 

Discussion Questions:

You might be surprised to learn that the following are all current and legal uses of your credit history:

1. Do you think insurance companies should use your credit history in order to set the amount you pay in premiums for vehicle insurance? Why or why not?
   
   
   
2. Do you think employers should know your credit history in deciding whether to hire you? Why or why not?
   
   
   
3. Do you think apartment owners should have access to your credit history when you apply to rent an apartment? Why or why not?
   
   
   
4. Do you think cell phone companies should have access to your credit history when you apply for a phone plan? Why or why not?

 

Follow-up Activity:

Request your free annual credit report. Check to see if credit and other information is accurate. This includes items such as your name, address, Social Security number, court judgments, and criminal actions. After reviewing the items, search online to see how you can improve your score.

From what we have been told, if you are under 18, your parent or guardian will need to request your credit report for you, in writing. And be sure not to share information from your credit report, as it is sensitive personal information that could be used to steal your identity!

 

Kentucky High School Financial Planning Program

http://www.ca.uky.edu/hes/fcs/hsfp

The purpose of the HSFPP financial updates, video lessons, and Web site is to assist county Extension agents, credit union educators, high school teachers, and parents who home school their teenagers so that they may improve the economic well-being of our teenagers; and also to show educators how the HSFPP, updates, and video lessons meet Kentucky core concepts. The Web site, updates, and video lessons are provided by the University of Kentucky Cooperative Extension Service, and are free to all educators. The list of core concepts and order form for free program materials including the student guide and instructors manual can be found on the Kentucky HSFPP home page.

If you are not already on our listserv:

The video lessons are available only to members of our listserv and will not be posted to the HSFPP Web site because of the timeliness of the information. If you would like to receive our video lessons, which are sent to our listserv biweekly, on alternate weeks from these updates, please sign up at the following page of our Web site: http://www.ca.uky.edu/HES/fcs/HSFP/response.htm.