History of the Big Three Credit Agencies – Education

As you embark on the credit repair process, you find that almost every decision made about your credit-worthiness leads back to one of three big credit reporting agencies. Ever wanted to learn more about these three companies that know so much about you? Meet the big three below:

Equifax

Equifax is the oldest of the three big credit reporting agencies. The company was founded in 1899 as the Retail Credit Company in Atlanta, Georgia. By the 1960s, the Retail Credit Company had files on millions of Americans and Canadians and was one of the largest credit reporting agencies. Although their business has always included credit reporting, their largest business through the 1970s was accumulating data for insurance companies to assess risk. Their sweeping records of individuals’ financial and personal lives was the catalyst for the Fair Credit Reporting Act of 1970. In 1975, RCC changed its name to Equifax. The company has 7,000 employees in 14 countries and maintains files on over 400 million people worldwide.

TransUnion

TransUnion began its life as part of the railcar leasing company Union Tank Car Company. They began offering credit reporting services after acquiring Credit Bureau of Cook County in 1969. CBCC, at the time, maintained 3.6 million card files which were stored in 400 seven-drawer file cabinets. They became the first company to automate and computerize their data, leading to quicker access to consumers’ credit information.

Over the last decade, the company has found itself the focus of controversy for failing to remove erroneous data from their credit files. In two separate cases, plaintiffs were awarded significant settlements. The company has been owned by Advent International and Goldman Sachs Capital Partners since February of 2013.

Experian

Experian was formed when British retail company GUS plc bought credit reporting agency TRW Information Services from Bain Capitol in 1996. Over the next decade, they expanded into countries in Eastern Europe, Asia and Latin America.

While that era involved mostly business to business, they started offering credit monitoring to individual consumers in 2002 via their newly acquired ConsumerInfo.com site. They have since expanded to offer marketing, data gathering and consumer services throughout the world. They have been criticized for charging for credit reports on their site FreeCreditReport.com, as consumers are guaranteed free credit reports at the government mandated AnnualCreditReport.com. They also paid a large settlement to the FTC in 2010 for failing to adequately disclose the $79 fee associated with the credit monitoring services offered on ConsumerInfo.com.

While there are other credit reporting bureaus, these three are the ones that will have the greatest impact on your home purchase goals. What’s most notable is the controversies that each has faced at some point in each of their histories. By knowing the past of each bureau and educating yourself about your rights as a consumer, you can gain confidence in your abilities to strengthen your financial health. Arm yourself with information to empower yourself as you repair your credit and work toward your life and financial goals.

For more credit education and to request a free consultation click here.

What is an FHA Loan? – Tips

When you start shopping for a mortgage, the number of types available can almost be overwhelming. If you have gone through a bankruptcy or foreclosure or if you don’t have a lot saved for a down payment, one option to explore is an FHA loan.

What Is an FHA Loan?

FHA loans are backed by the Federal Housing Authority. The program was established in the 1930s in response to the massive number of foreclosures that occurred during the Depression. The guaranteed loans meant that lending was less risky for banks and mortgages more accessible. Since the loans are backed by the federal government, they are less risky for lenders. These loans can be a good match for people who have recently gone through credit repair. They require lower down payments and even people who have had serious credit issues such and bankruptcies and foreclosures can be approved.

What Are the Benefits of an FHA Loan?

An FHA loan requires only a 3.5% down payment. The money for the down payment can be a gift from a friend or relative, which can be a boon to young first-time buyers. FHA loans are often available even to people who have had bankruptcies or other credit issues.

Another interesting benefit of an FHA loan is that it is an assumable loan. What that means is that, when selling a house, the next owner can simply pick up payments where the last owner left off. This can make the house more desirable to buyers if you ever choose to sell.

Are There Drawbacks to an FHA Loan?

While FHA loans have a lot of qualities that make them an attractive home purchase option, there is also one big potential drawback to this sort of loan. Because an FHA loan has more lax requirements, it comes with hefty insurance payments.

To get an FHA loan, you’ll need two types of insurance. The first is an upfront mortgage insurance premium (MIP) that is equal to 1.75% of the mortgage. This is either paid at closing or can be added to the loan amount. The second is an annual mortgage insurance premium which is paid monthly. The cost of this insurance varies depending on the term of the loan and how much you are borrowing.

Do You Qualify for FHA?

FHA borrowers have to meet a number of requirements. Some are very rigid, but others can be worked around if the lender has justification. A few key qualifiers:

  • You must be over the legal age to sign a mortgage in your state and have a valid Social Security card.
  • You must be steadily employed. For the FHA, this usually means that you have been with the same employer for two years or more or that there are no gaps in your work history.
  • To qualify for the 3.5% down payment, you need to have a credit score of 580 or better.
  • You need to be two years out of bankruptcy and three years out of foreclosure.

FHA loans make home ownership a much more attainable dream. When looking for a loan, check all your options to find the one that works best for you.

For more information on FHA loans feel free to contact our office at 617-265-7900 or feel free to request a free consultation you can click here.

The Fastest Fixes for Your Credit Score – Tips

Are you this close to approval for a home loan? It can be frustrating to go to so much work in your credit repair efforts but still fall just a bit short. Luckily, there are a few tactics you can use to increase your credit rating fast:

The Fastest Fixes for Your Credit Score

Go over your credit report with a fine tooth comb to ensure that there are no errors that are lowering your score. You can request copies of your report from the three major reporting agencies. This can be done free once a year or after being denied credit or for a small fee at any other time. Common errors include:

  • Failing to remove old negative reports. If these linger after they are resolved, they can lower your score. Contact the credit bureau to get these removed.
  • Failing to report increased credit limits. If the limits shown on your credit report are too low, it can look like you are maxing out a card when you are not.
  • Failing to show accounts that have been paid off.
  • Duplicate report entries. If a debt has been transferred from one creditor to another, it can sometimes appear twice on your credit report, making it look like you owe more than you do.

Contact creditors and the credit reporting agencies, in writing, to get these potential negatives fixed. There are also errors that matter less, such as outdated address or employer information. These do not negatively affect your score, so correcting them is not worth your time.

Pay Down Balances

This is one of the quickest way to increase your credit score. The ratio of available credit to balances makes up about a third of your credit score. If you are carrying a high balance on one of your cards, it can be worthwhile to dig into savings to pay it off. Experts recommend carrying a balance equal to no more than 10% of your available credit. That means, if you have a $10,000 credit limit, keep your balances under $1,000 at any given time.

Use an Old Credit Card

The age of your accounts is one of the factors that go into your credit score. Lenders like to see that you have had an account for a long time; it is a sign of stability. But, if you stop using an old card, your credit card company might close it for lack of use or stop reporting on it. If you have a credit card that you haven’t used in a few years, put one of your recurring payments like a health club or your Netflix account on it. This way, a small amount gets charged to the card each month without affecting your regular spending habits. Just remember to pay it off in full every month.

Don’t let minor credit issues hold you back from your home purchase goals. By finding the problems and correcting them, you can increase your score and get lenders to take a second look.

For more information on professional credit restoration services you can reach out to us monday through friday between 9am and 8pm.

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