Consumer Bureau: Scoring thin credit files

Very interesting article on the consumer bureau data published by Nilson Report in their September 2007 issue and posted on Lexis Nexis website.

Excerpts from the article, for more read from Lexis Nexis Website:

The three major credit bureaus – Equifax, Experian, and TransUnion — maintain records on 172 million adults that contain enough data on file to create a credit score using automated systems. Those adults represent 75% of the total adult
population in the U.S. There are another 24 million adults about whom the credit bureaus have no information at all. And falling between those files even if the person has not yet established a tradeline. Full files by comparison average 13 to 14 tradelines that have been updated in the last six months.

Understanding Your FICO Score

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Understanding Your FICO Score

History of SSN

President Roosevelt in 1932 came up with term Social Insurance which means: "To address the permanent problem of economic security for the elderly by creating a work-related, contributory system in which workers would provide for their own future economic security through taxes paid while employed". With this ideology in mind SOCIAL SECURITY ACT was signed into law by President Roosevelt on August 14, 1935.

PRESIDENTIAL STATEMENT SIGNING THE SOCIAL SECURITY ACT. AUGUST 14,1935

Part of the act was to established a Social Security Board (SSB). First task of this board was the need to register employers and workers by January 1, 1937, when workers would begin acquiring credits toward old-age insurance benefits. By deadline over 30 million SSN cards were issued through this early procedure, with the help of the post offices. By June 30, 1937, the SSB had established 151 field offices.

Social Security Number Chronology

SSN Timeline from Google

SSN evolved with above motto and now world revolves around it.

Few SSN timelines Related to Credit World:

• IRS adopted SSN in 1961
• Banks and Credit firms started adopting SSN from 1970
• Since 1982 all applicants for loans under any Federal loan program required to furnish their SSNs to the agency supplying the loan.

Experian Study Shows 30 Percent of U.S. Consumers Improved Their Credit Score Up to 50 Points in Six-Month Period

Experian’s National Score Index further finds 15 percent of consumers with a PLUS Score® between 600 and 649 in January 2007 increased their score by 50 to 100 points in June

Irvine, Calif., Oct. 16, 2007 — Three out of every 10 U.S. consumers improved their credit score by up to 50 points in a six-month period from January to June 2007, according to the latest National Score Index® study by Experian Consumer DirectSM, the leading provider of online direct-to-consumer credit reports, scores and monitoring products.

...read further at Experian website

Give SSN or No and What does my report contain?

Employers, finance company, Insurance, landlord and others do not need SSN to pull your bureau report from any of the three [Experian, Equifax, Transunion] consumer bureaus. Your name and address is sufficient to find your report. Then why do above people request SSN, these is my assumption; just to confirm you are who you are. Report returned from the bureaus contains your SSN, current address and past addresses. If you provide incorrect information bureau report will flag.  If you give incorrect address or invalid first and last name bureaus will not return any report. Some times even if you gave right address/name and bureau did not return report that means they might not have your report.  Not every bureau will have your information and some time all three bureaus will have different scores [Depends on which credit card and loans you have]. Also note each bureau has better coverage in certain parts of the country and take note when you relocate.

What exactly does your report contain: Below are sections:

1. Section 1:   Name, Alias Names, Current Address, Past Addresses, Employer
   
2. Section 2: Profile Summary [public records, past due amount, number of inquires, number of accounts, total balance in the credit cards, total on all your credit cards, total mortgage amount]
   
3. Section 3: Your FICO score and score factors used [Request your lenders to explain this]
   
4. Section 4: Your open/closed/neutral trade lines [all open and closed credit cards, open and closed student loan, car loans, house loans and any back accounts]
   
5. Section 5: Information about who pulled your report. 
   
6. Section 6: Any flags either by homeland security or by other lenders
   

Every bureau bylaw is suppose to provide you a free copy of your report without a score, when you get your report make sure you look into section 4 [Trade Lines] and section 5 [Inquires]. Make sure all the opened credit card are yours and also make sure nobody is pulling your report without you knowing. My advice is to utilize this free report and make sure review your report once a year to avoid identity theft.

You can also call bureau and set a lock on your report, bureaus will lock your report and will not give away until you provide the approval. This is one extreme way of protecting your identity.  If you have done this then just have it unlocked before you go for a loan. 

In the next blog I will post few technical stuff on consumer reports.

Good Night

FICO 8.0....

Banks do not just rely on FICO score alone to give credit to their customers, everybody knows to get a good rates they evaluate more. Now why would banks in case of subprime borrowers they just rely on FICO score...when i am giving out money i would be extra careful...anyhow all the three consumer bureaus are upgrading the FICO score basically fine tuning:

model will continue to look at the same factors, including consumers' level of credit indebtedness and payment histories, length of credit histories, number of recent credit openings and inquiries, and the type of credit used, to determine scores.

But the new model will more finely slice and dice the information in consumers' credit files to do a better job of separating the "good risks" from the "bad risks," particularly for subprime borrowers; those with "thin," or young, credit files; or consumers who are actively seeking new credit. "Those are the communities that lenders are most interested in" to determine credit risk, says Craig Watts, spokesman for Fair Isaac.

below link you can download PDF version explaining everything about your credit score.

Understanding your credit score