Maine’s credit watchdog agency has published the latest in its series of consumer guides, this one focusing on credit reports and credit scores.
A good deal of misunderstanding surrounds the ways credit scores are figured and the need for continually updating your credit report. Maine’s Bureau of Consumer Credit Protection (BCCP) just released the Downeaster Common Sense Guide: Credit Bureaus and Credit Reports.
Creditors, employers, banks and others with whom we have dealings use credit report information when making financial decisions. As the guide states, lenders believe someone’s credit report gives the best indication of whether that person will be able to repay a loan. Credit reports are produced by credit reporting agencies (credit bureaus); the findings of those entities may not always agree.
William Lund is superintendent of the BCCP. He says as many as one-quarter of all Mainers may have errors or incomplete information in their credit reports. One reason is because credit bureaus use different formulas to determine credit scores, the numbers that indicate our credit worthiness. The most widely used model is the Fair Isaac Corporation (FICO) score, ranging from a low of 300 to a high of 850.
Lund said a consumer needs to check his or her credit report frequently to make sure errors or omissions do not negatively affect the person’s credit rating or score.
There are three major credit reporting agencies: Equifax, Experian and Trans Union. The law allows consumers a free credit report from each of them every year. Request one in January, another in May and a third in September — or another four-month rotation — to keep a constant check on your report status.
You can order your free report online at AnnualCreditReport.com, by phone at 1-877-322-8228 or by writing to Annual Credit Report Request Service, POB 105281, Atlanta GA 30348-5281.
The guide contains several tips for improving your credit:
— Pay loans on or before the due date; set up automatic payment or payment reminders to be sure you’re current.
— Limit yourself to three or fewer credit cards; limit card balances to no more than one-third of your credit limit.
— Try to keep your oldest credit card accounts indefinitely, if the annual fees are favorable.
— Reduce debt on other loans as much as possible.
David Leach is principal examiner at the BCCP and a principal author of the guide. “Through this guide, we encourage all Maine consumers to order free copies of their credit reports each year and to carefully review them for errors and even the occurrence of identity theft.”
The guide offers some cautions, one involving co-signing for a loan. You’ll go through the same credit check as the primary borrower; if that person can’t keep up with the payments, a delinquency will appear on your credit report. You’ll then be responsible to repay the loan, and your ability to get new credit could suffer.
Another caution involves credit repair scams. People may promise to “fix” your credit if you pay up-front fees, tell them your account number and bank’s routing number or wire cash; these are all signs of scams. Trust your instincts and just say no.
You can call the BCCP for help on credit matters. The toll-free number is 1-800-332-8529. You can get copies of all the Downeaster Guides at maine.gov/pfr/consumercredit/publications.htm.
Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer, ME 04412, visit http://necontact.wordpress.com or email email@example.com.