A credit score is the key cog to some of life’s biggest purchases. That’s a fact that you should already know, as the better your credit score, the less interest you’re likely to pay on major purchases like mortgage loans and auto loans, among others. A poor credit score is going to cost you more long-term, that is if you’re even approved for the loan at all.
Every consumer should have at least a basic understanding of the importance of credit scores, similar to what we outlined above. But there are a lot of other neat tidbits about credit scores and credit reports that you might not be aware of. Join us as we take a look at 20 of the most notable ones:
20 Interesting Facts about Credit Reports
- Only about one-third of Americans look at their credit report annually.
- Everyone is entitled to one complimentary annual report from each of the three major credit bureaus, so there’s no excuse not to look at it annually.
- According to a study from the Federal Reserve, the larger the gap between your credit score and your spouse’s score, the greater you are at risk for divorce.
- Speaking of spouses and credit scores, you can now find a date based on credit score at CreditScoreDating.com. After all, they say that money issues are one of the leading causes of divorce…
- The ‘Greatest Generation’ has some great scores. If you grew up during and in the aftermath of the Great Depression, it’s plausible to assume you’ve been well informed on financial responsibility. Hence, the Greatest Generation, comprised of those 66 and up, have an average score of 829.
- Piggybacking off the last fact, Gen Y’ers have the lowest average generation credit score, coming in at 672.
- It’s estimated that about 50 percent of all Americans don’t have one late payment on their credit report.
- Payment history, which includes the frequency of late payments, is the single-largest credit score calculating factor at 35 percent of the FICO score.
- Contrary to what you may think, you’re not entitled to a higher credit score based on the level of education you’ve completed.
- Your credit utilization ratio is your debt to total credit allotment. For the best credit score, make sure your debt doesn’t exceed 30 percent of your limit.
- Thankfully, for most Americans, their debt doesn’t exceed 30 percent of their limit. Only about 16 percent of Americans use 80 percent or more of their limit.
- Insurance companies have observed that credit scores also impact risk. For instance, the lower the credit score, the more likely that person is to file a claim.
- According to the FTC, about one out of every five Americans has an error on their credit report.
- Employers can access credit reports when making hiring decisions.
- Speaking of which, about one of every 10 Americans are passed over for a job because of their credit report.
- If you’ve never had a credit card or an open line of credit, you won’t have any credit history or a FICO score.
- Even someone with no credit score, however, can get a mortgage. It just has to be done via manual underwriting.
- TranUnion, one of the three major credit bureaus, started in the railway industry.
- If you max out a credit card, you may be docked up to 45 points on your credit score.
- Contrary to what many people think, the money you earn has nothing to do with how high or low your credit score is.
What the Data Breach Prevention and Compensation Act Could Mean for You
The big Equifax hack of 2017 created a mess for a lot of American consumers. In fact, it’s estimated that about 143 million Americans were victimized in the hack, and the hack has the potential to be very detrimental in the long-term should the hackers take the confidential information that they swiped and put it to use. As if the hack wasn’t bad enough, Equifax was widely criticized for how it handled the matter and its lack of transparency with consumers. Bottom line: The hack was a raw deal, especially for American consumers. Equifax, while subject to bad publicity, might end up making money off of it in the long run.
There could be hope moving forward, however. A new bill introduced by U.S. Senators Elizabeth Warren (D-Massachusetts) and Mark Warner (D-Virginia) would penalize the credit reporting agencies in the event of any future data breaches. The thinking behind the bill is that any future data hacks wouldn’t just spell bad news for American consumers, but for the agencies that left consumer data susceptible too. The bill is a direct response to the perception that credit bureaus aren’t doing enough to protect the data they collect.
What this bill would mean:
There’s no word on whether the bill will be going to a vote, but here’s a closer look at what the bill would mean should it pass:
- Credit reporting bureaus would be subject to regular inspection by the Federal Trade Commission (FTC) to ensure that they’re taking the proper measures to protect confidential consumer data.
- Should a data breach occur, the FTC would be authorized to fine the credit reporting agencies $100 per consumer affected. The bill calls for half of the amount collected for such purposes to go to the consumers that were impacted. Think about that for a moment. If this bill were in effect when the Equifax hack occurred, the FTC could have collected up to $14.3 billion in penalties, with over $7 billion getting kicked back to the consumers who were victimized.
- Senator Warren hasn’t been a stranger to proposing credit-related legislation. Following the 2017 Equifax hack, she proposed a pair of bills. One would have prohibited employers from making hiring decisions based on a person’s credit. The other would have allowed consumers to indefinitely freeze and unfreeze their credit any time they wished for free. Neither bill made it out of committee and to vote, however.
- The Consumer Industry Data Association opposes the proposed bill, stating that the reporting bureaus already follow stringent enough standards. In a statement to CNET, its president and CEO said the bureaus would, however, like to work with Congress to make credit reporting safer and more secure.
The 2017 Equifax hack was blamed on a pair of issues – human error and a technical mishap. With that in mind, it’s enough to wonder if just one of the issues were to have been removed if the data breach would have occurred at all. For some, the proposed bill may be viewed as even more red tape in an already highly regulated field. But when it comes to data as confidential as social security numbers and credit information, can you really be too careful?
Whether you’re looking to adopt a new pet or you’re seeing the medical bills pile up for your current aging pet, believe it or not, your four-legged family member can take a huge toll on your credit score. For future pets, how you acquire it can sometimes make all the difference with your credit score. For current pets, unexpected medical expenses, vet visits and more can all add up to impact your credit utilization ratio. Here’s a closer look at what you should be mindful of when it comes to pets and your credit score:
Caring for an Aging Pet
Just as aging humans typically need more medical care, the same is true with pets. But while humans likely have medical insurance to cover or help offset expenses, pets usually don’t. And when prescriptions, an increased number of vet visits and medical procedures become more frequent, the costs can really add up. If you don’t have the cash on hand, it could drive you into debt. Here’s how to help manage such costs:
- Save for a pet emergency fund: Even setting aside $1,000 a year can really help with your pet’s medical bills.
- Talk to your vet about costs: Just taking your pet to the vet costs money. Speak with your vet to see if they’ll be willing to waive the vet visit fee if you have to take your pet in more than twice a year, for instance. Most vets will work with you this way to retain your business.
- Look into pet health insurance options: While still fairly uncommon, there are options out there. Before selecting one, be sure that it makes sense for you and your pet’s situation.
Acquiring a New Pet
- Are you buying or leasing your pet? Yes, leasing, or renting, a pet is a thing – you might just not know that you’re doing it. Many pet stores offer financing plans for their more expensive pets, but what they won’t tell you is that the pet is technically still theirs until you pay it off. Any financing agreement impacts your credit reporting, and while financing a pet could be a good thing in terms of building credit history, it could also be a bad thing too if you don’t stay up with payments or if the pet store is unethical about the process.
- Speaking of unethical pet stores, many experts state that you should try to use credit cards as payment to adopt pets. Why? Because if something goes awry or the pet store disputes the purchase, you have a paper trail of the transaction. A credit card can help prove that the pet belongs to you. It can also be an ally in your corner if there’s something wrong with the pet in terms of getting a refund if the pet store is uncooperative.
We love our pets. To many, they’re part of the family. But don’t let your furry family member lead you into financially troubling times.
It’s a new year, which means it’s time to make some new resolutions. This year, we challenge you to make managing your finances – and improving your credit score – a priority, along with any other pledges you decide to make at the start of 2018. If you haven’t already, you can get back on the right financial track by paying off any debts you’ve accrued thanks to your holiday spending. After you’re done with that, here’s a look at some other financial resolutions to make and mistakes to avoid as 2018 gets into swing:
Top 2018 Financial Resolutions to Make (and Money Mistakes to Avoid)
- Start an emergency fund: Minimally, you should try to have an emergency fund with enough to pay up to three months worth of bills (i.e., mortgage or rent, utilities, auto payments, etc.). It’s this type of breathing room that can come in handy in the event of an unexpected auto or home repair, or if the unthinkable happens and you found yourself out of work for a period of time. A lack of an emergency fund can cause you to take out loans when the unexpected occurs, which can leave you playing catch up when the dust settles.
- Set a budget (and stick to it): Come up with a list of financial goals that you want to accomplish (i.e., investments, retirement savings, pay off loans, etc.). Then, come up with a reasonable monthly budget that can permit you to meet said goals and do your best to stick to it. Not setting a budget can be the start of a slippery slope into debt. Consider using a mobile app like Mint to manage everything.
- Don’t oversubscribe: Entertainment these days comes at a price. And while the likes of Netflix, Hulu, HBO Now, Amazon Video and other services may not cost a lot individually, together they can add up. In order to stay true to your budget, consider only subscribing to one or two premium services at a time. That’s one of the best things about said services – you can cancel and restart them at any time.
- Set automatic payments for your bills: Making on time payments is the single-largest category that impacts your FICO score, and late payments can cause your score to take a serious hit. On that note, let technology work for you when it comes to making on time payments and set up automatic payments online. This way, you’ll never have to worry about missing a payment again.
- Refrain from charging: To continue the theme of setting a budget and sticking to it, we challenge you to only charge what you know you can pay off. Going overboard on credit card spending can spiral out of control and cost you a lot more long-term. If you have credit card debt accrued, commit to paying off the cards with the highest interest rates first to save more in the long run.
Follow the above five tips and you can make 2018 a financially prosperous one.
Top 10 U.S. States With the Highest Percentage of Residents in Debt
Did you take out student loans? Do you own a home? Do you have unpaid bills that have gone to collections? Do you have a balance on your credit card?
If you’ve answered “yes” to any of these four questions, chances are you’re in debt of some kind. Debt isn’t necessarily a bad thing. For instance, mortgages and students loans are essential for the majority of Americans in order to get the education required to make other dreams (like owning a home) a necessity. However, maxing out credit cards, bills going to collections, and bankruptcies and foreclosures aren’t good things to have on your record.
When it comes to debt, however, you’re hardly alone – and debt varies on a state-by-state basis. If you live in Minnesota or either of the Dakotas, for instance, you live in a state where the fewest percentage of Americans are in debt. Elsewhere around the nation, it’s a different story. That said, here’s a closer look at the top 10 states with the highest percentage of Americans in debt.
Top 10 States According to Residents in Debt
The following data is based on a December 2017 report from Forbes, according to data tracked in 2016:
- Louisiana: Louisiana leads the nation in this category, as nearly half of its residents (46 percent) are in debt.
- Texas: Just slightly behind Louisiana, about 44 percent of all residents of the Lonestar State are in debt.
- South Carolina: 43 percent of all South Carolinians are in debt.
- West Virginia: 42 percent of West Virginia residents are in debt.
- Nevada: Nevada rounds out the top five, with 41 percent of its residents in debt.
- Alabama, Georgia, Kentucky, Mississippi, New Mexico: Though this is a top 10 list, the five states of Alabama, Georgia, Kentucky, Mississippi and New Mexico all tie for sixth place, with about 40 percent of residents, respectively, in debt.
Most Indebted States (By Value)
While the following list considers the percentage of residents in debt, we figured it would be noteworthy to include a separate list of the states where residents are the most indebted. Perhaps not surprisingly, the wealthiest states in the nation tend to lead this list because they’re buying more expensive properties, cars, etc. Unlike the list above, this one isn’t necessarily a bad list – just so long as the residents keep up with their payments in paying down debt owed. Here’s a look:
- California: With all that Hollywood glitz and glam, and high coastal property values, the average California resident is in debt at just over $336,000.
- Hawaii: Everything is more expensive in Hawaii, which is why the average resident is in the hole about $321,000.
- Maryland: The average Maryland resident is about $263,500 in debt.
- New Jersey: Though a bit surprising, the average New Jersey resident is some $257,500 in debt.
- Washington: Rounding out the top five is Washington, where the average residents is $243,800
How to Prepare for the Holidays (While Protecting Your Credit Score)
Tis the season…to be spending.
Yes, with the holidays fast approaching, chances are you’ve made your list (and checked it twice). But when it comes to holiday spending, you want to be sure that your credit score doesn’t get naughty, but stays nice. With all the spending you’re likely to do, combined with the increased threat of scammers this time of year, keeping your credit in good shape can be easier said than done. That’s why we’ve put together this handy list of tips and suggestions for how to prep for the holidays, while keeping your credit score in good shape. Here’s a look:
Tips and Suggestions for Holiday Spending (While Protecting Your Credit Score)
- Use credit cards, not debit cards, to minimize impact of fraud: Any type of fraudulent purchase made on your credit or debit cards isn’t good, but those made on debit cards have the tendency to be a lot more impactful than those made on credit cards. That’s because the money spent can take more time for you to get back – and scammers are spending money that you already have in your account, not money that you’re promising to pay back later, as is the case with a credit card.
- Be careful about where you shop: Another important tip to safeguard against scammers – be careful where you’re shopping, especially when it comes to online shopping! We get that things can get expensive around the holidays and you’re looking to save where you can, but be cautious about where you’re providing your credit card information. Look for the padlock symbol to verify site security, and if a deal seems too good to be true, know that it’s likely because it is too good to be true.
- Watch your credit utilization ratio: We strongly suggest that you only charge purchases you know you can pay off before the end of the year, but regardless of your situation, it’s important to watch your credit utilization ratio, which is your debt versus your total credit allotment. Ideally, you want to keep this ratio at 30 percent or less for it not to lower your credit score. For example, if your credit limit on a card is $10,000, you want your spending to be $3,000 or less.
- Refrain from opening new lines of credit: New credit cards don’t just have the potential to impact your credit utilization ratio, but every time you apply for one, your credit information is pulled, which also lowers your score.
- Make on time payments: This accounts for 35 percent of your FICO score, so it’s incredibly important to make on time payments with any and all bills. Failure to do so will almost certainly lead to a significant drop in your credit score. In a perfect world, you should try carrying a zero balance on your credit cards and only charge what you know you can pay off each month. That’s not realistic for everyone, but regardless of the situation, making on time payments should always be a priority.
A BRIEF HISTORY OF EXPERIAN
Experian’s roots date back nearly 200 years, making the credit reporting bureau the longest tenured among the “big three” status that the firm shares with TransUnion and Equifax. It’s also the biggest of the three bureaus, with data on more than 235 million people worldwide, headquarters in the U.S. and Europe, and a workforce of about 17,000 employees worldwide. But Experian didn’t become this impactful overnight. Here’s a brief look at the history of Experian and how it gradually morphed into the credit reporting giant that it is today:
- 1826: Experian’s roots can be traced back to London, England, in the early 1800s, when a group known as the Manchester Guardian Society began sharing information on citizens who failed to settle their debts. This was one of the earliest accounts of modern day credit reporting on record.
- 1897: We jump ahead and move from across the pond to Dallas, Texas, when a Dallas, Texas-based lawyer began compiling lists of local citizens based on whether or not they were at-risk consumers.
- 1960s: We take another big jump ahead in time to the early 1960s, when two aerospace engineers with a hunch that currency would transition from cash to credit formed a credit information unit branch of TRW, Inc. TRW’s credit information branch would eventually go on to become Experian in the 1990s.
- 1970s: TRW follows up its credit information branch with the launch of a small business database branch.
- 1980s: The credit information and small business database branches of TRW continue to see major growth, and by the mid-80s have accrued data on more than 90 million Americans.
- 1986: TRW began selling consumers their credit reports for an annual fee of $30 in this year. This eventually came to an end, however, as the Fair Credit Reporting Act granted consumers one free report each year.
- 1991: This year marked one of TRW’s biggest mistakes as a credit reporting agency. The mishap involved a TRW investigator concluding that about 1,500 Vermont residents had not paid their property taxes, causing their credit scores to take a big hit. Following this, similar mistakes came to light. These blunders put TRW in a negative light, forcing the company to make major changes to its operators and customer service practices.
- 1996: Experian is officially launched. Brian Capital and Thomas H. Lee Partners acquired TRW as Experian. Shortly after, the two firms sold Experian to England-based Great Universal Stores Limited (GUS).
- 2006: Experian de-merges from GUS and, for the first time, is listed on the London Stock Exchange.
- 2017: In March 2017, Experian agreed to pay a $3 million fine for dispersing incorrect credit information to various consumers. The fine was imposed by the Consumer Financial Protection Bureau.
- Present day: With headquarters in Dublin, Ireland, Nottingham, United Kingdom, and Costa Mesa, California, Experian reports operating revenue of about $4.5 billion (U.S.) annually. It operates in 37 countries and keeps data on some 235 million U.S. consumers and 25 million U.S. businesses.
A Brief History of Equifax
Along with TransUnion and Experian, Equifax helps make up the “big three” of the credit reporting bureaus. And though Equifax’s story isn’t quite as tenured as Experian, its roots date back to the late 1800s when it began as a grocery store. Here’s a look at how the Atlanta-based company grew into the credit reporting giant that it is today.
- 1898: Equifax’s roots begin in this year as a Tennessee-based grocery story. Founded by brothers Cator and Guy Woolford, each got their start in the credit business as grocers, where they compiled lists of customers based on their creditworthiness.
- 1899: The Woolfords moved to Atlanta with the goal of making credit reporting their new career. In Atlanta, Georgia, in 1899, the Retail Credit Company was born. Compiling credit information into a book, the Woolfords sold copies to merchants. The company posted a loss of more than $2,000 in its first year, but sold many more books the following year.
- 1901: Retail Credit Company expands into the moral hazard market, selling credit information to life insurance companies.
- 1913: Retail Credit Company incorporated in 1913 and continued to grow its insurance-related business. During this period, it began reporting for automotive liability insurance.
- 1920: Retail Credit Company continues to grow. By 1920, it has 37 branches throughout North America.
- 1923: The company forms Credit Service Exchange, a credit rating operations firm. This entity was later sold.
- 1930: The Retail Credit Company has 81 branch offices throughout North America.
- 1960s: Post World War II is a period of rapid growth for the company, and by the mid-1960s, Retail Credit Company has 300 branch offices and 1,400 sub offices. This was also a period where data was transitioned from written index cards to electronic data systems.
- 1970s: Retail Credit Company buys credit bureaus in Oregon, Idaho, Washington D.C. and California. In 1971, Retail’s credit reporting also began to be governed by the Fair Credit Reporting Act, which took effect in April of 1971. In the early days of the Act, Equifax was a frequent violator.
- 1979: Retail Credit Company changes its name to Equifax. It’s believed that this change was part of a means to improve its image after being found in violation of the Fair Credit Reporting Act after it was signed into law in 1971.
- 1986: The company amasses data on more than 150 million consumers in 28 states.
- 1988: The company now covers all 50 states, with revenue of $743 million.
- 1989: Equifax forms an alliance with CSC Credit Services.
- 1990s: Equifax expands internationally with acquisitions in the U.K., France, Canada and Chile, among others.
- 2017: Equifax is the victim of a massive cyber hack, which is believed to have exposed the personal, confidential information of about 145 million Americans. Equifax was widely criticized for the hack and for how it responded after the matter. (to see if you were a victim of this hack, please click here.)
Today, Equifax has a workforce of about 14,000 employees throughout 19 countries, and reports revenue of $3.14 billion per year.
You likely already know TransUnion as one of the “big three” credit reporting agencies. And though it’s actually the smallest of the big three behind Experian and Equifax, the Chicago, Illinois-based company has a rich 49-year history. What’s more is that unlike Equifax, it doesn’t have the baggage hanging over its head in the wake of the massive hack from summer 2017.
TransUnion profiles just about every credit-active consumer in the United States, so it’s safe to assume that it knows a lot about you. But how much do you know about it? Here’s a brief history of TransUnion so that you can get better acquainted with the firm that already knows your consumer behavior so well:
- 1968: This was the official year that TransUnion was born. Specifically, it was born as the parent holding company to the Union Tank Car Company, which practiced in the rail car industry.
- 1969: A year after TransUnion was born, it acquired the Credit Bureau of Cook County (CBCC). The CBCC had maintained more than 3.5 million card files, making TransUnion the first in the credit reporting field to streamline consumer file updates. But its days as a credit reporting bureau were just getting started.
- 1981: TransUnion is sold to The Marmon Group for $688 million.
- The 90s: In addition to growing staff and expanding its facilities, TransUnion branched out to offer business-to-business services. This offering was in addition to its existing ability to maintain and update credit information on every market-active consumer in America.
- 2002: TransUnion acquires www.TrueCredit.com, marking its entry into the direct-to-consumer market. TrueCredit.com helps consumers better understand their credit scores and outlines strategies to help improve them.
- 2010: Goldman Sachs Capital Partners and Advent International acquire TransUnion.
- 2013: In October 2013, TransUnion launched CreditVision, an evolution of the traditional credit score that is designed to better identify consumer trends, consumer behavior, and debt and repayment data.
- 2014: TransUnion implements ResidentCredit, a consumer-friendly tactic that reported on rental payment data as a means of boosting credit scores. In 2014, the company also acquired TLO, which collects data on people and companies from about one hundred thousand sources of data, for $154 million.
- 2015: In January 2015, TransUnion revamped its brand and mantra with the goal of conveying its desire to empower consumers to make smarter decisions and live better lives.
- 2015: In June 2015, TransUnion becomes a publicly-traded company for the first time in its history. It trades under the “TRU” ticker symbol.
- Today: Presently, TransUnion is a worldwide company with about 4,700 total employees. In 2016, it posted total revenue of about $1.7 billion. Today, TransUnion compiles and aggregates data and information on more than 1 billion consumers across more than 30 countries.
As you can see, TransUnion didn’t turn into the credit reporting giant that it is today overnight. It took nearly 50 years of strategic acquisitions, innovative product launches and diversifying. Minimally, every consumer should know that they can receive one free credit report per year from TransUnion.
A Brief Timeline of Financial Crisis
If you’re not learning from the past, chances are you’re doomed to repeat it. That’s why it’s so important that we all learn from the financial crisis and the mishaps of the past, from the recent “Great Recession” of 2008 all the way back to the 1772 credit crisis. Here’s a closer look at some of the great financial crises and what we need to take out of all of them:
A Timeline of Financial Crisis
16 Nov 1930, Chicago, Illinois, USA — Notorious gangster Al Capone attempts to help unemployed men with his soup kitchen “Big Al’s Kitchen for the Needy.” The kitchen provides three meals a day consisting of soup with meat, bread, coffee, and doughnuts, feeding about 3500 people daily at a cost of $300 per day. — Image by © Bettmann/CORBIS
- Crisis of 1772: Originating in London and then spreading throughout Europe, the crisis stunted economic growth and led to the failure of 20 banks.
- The Great Depression: Fueled by a drop in stock prices in September 1929 and a full-blown stock market crash less than two months later, the Great Depression had a major impact on the entire world. Worldwide GDP fell by 15 percent, trade plummeted and unemployment skyrocketed. Many economies didn’t recover until World War II began.
- 1973 Oil Crisis: Due to perceived support of Israel during the Yom Kippur War, OPEC embargoed oil to a variety of Western nations, including the U.S. This embargo caused oil prices to skyrocket from $3 a barrel to $12 worldwide. A second crisis occurred in 1979.
- 1997 Asian Financial Crisis: With Thailand bankrupt, crisis spread throughout much of Asia in 1997, often raising concern that it could spread worldwide. The crisis was plagued by low currency, devalued stock markets and an increase in private debt. Debt-to-GDP ratios also climbed.
- The Great Recession: Though this recession lasted less than two years, the effects were devastating. A financial crisis and subprime mortgage crisis was the perfect double whammy for this recession, so much so that the financial sector was in great peril (that is, before the banks were bailed out). The housing market tanked and manufacturing slowed to a trickle, forcing a variety of bankruptcies and closures.
So what can we learn from the various crises of the past? Lots. For instance, don’t invest all of your money in one entity – diversify it. Secondly, it’s always a good idea to take the appropriate measures to ensure that you’re debt free. Not only does this keep your credit score and borrowing power high, but things are less likely to snowball on you in times of uncertainty. And finally, live frugally. Don’t borrow any more than what you need – and only do it when you need it.