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Federal Employees News Digest : April 29, 2013
April 29, 2013 Vol. 62, No. 39 7 Visit us on the internet at www.FederalDaily.com Federal employees are encouraged to check their three credit reports and their credit score as part of their financial "spring cleaning." Under the Fair and Accurate Credit Transaction Act of 2003, all individuals are enti- tled to one free credit report from each of the three credit reporting agencies -- Equifax, Experian and TransUnion. These reports may be obtained via mail or downloaded by going to the website www.annualcreditreport.com. There is good reason for individuals to review their credit reports. A recent study by the Federal Trade Commission revealed numerous errors in credit reports. In the FTC study, 262 of the 1,001 individuals who reviewed their credit reports spotted at least one poten- tial material error on their reports, including credit card accounts that do not belong to the individual or late pay- ments the individual believed they did not make. The FTC study emphasizes how much can go wrong in the process of collecting billions of pieces of information on more than 200 million consumers. No doubt the system could be more accurate. But it is up to credit report owners to check their reports for problems and to address these problems. Here are some examples of problems that may occur with credit reports: • An identity thief opens an account in an individual’s name or changes one of the individual's accounts to a different address and runs up debts that will not be paid. Individuals might not learn of such fictitious accounts until debt collectors start calling. • Bills that were paid may not be posted, or may be posted to the wrong account, or amounts owed might be incorrect. Individuals who have errors in their credit reports should take steps to correct the errors. First and foremost, they should annually request a copy of each of their three credit reports and meticulously review each report. If any credit report has errors, the individual should write a letter to the credit reporting agency explaining the error. The letter should be accompanied with copies of supporting documents and mailed via certified mail. The lender whose erroneous information appears on the report also should be contacted and asked to address the problem. The credit bureaus resolve some disputes in-house, but most dis- putes are assigned a code that is sent to the lender or debt holder, sometimes with a brief explanation. The lender or debt holder either acknowledges an error or rejects it without ever seeing and reviewing supporting documentation. While there is no formal appeals process in the case of credit report- ing agency disputes, if the first dispute is rejected, then an individual filing the dispute is able to protest again to the credit reporting agency or lender and send more information. If that does not resolve the issue, then the individual can add a brief explanation to his or her credit report. The individual can also file a complaint with their state attorney general and the federal government's Consumer Financial Protection Bureau (CFPB). The CFPB began accepting credit reporting agency complaints in October 2012 and is authorized to oversee the three big credit reporting agencies. If these efforts fail and the individual's creditworthiness is at stake, it may be worth hiring a con- sumer lawyer to sue. A credit report and an individual's creditworthiness is that important. Another recommendation for employees is to annu- ally check their credit score. The credit score is a numeri- cal measure of how risky an individual is as a borrower. The "FICO" score is the most widely used credit score and was created by the firm Fair Isaac and Company. The FICO score is reported on a scale of 300 (the worst possible credit history) to 850 (the best possible credit history). Generally, a FICO score of 750 or higher will qualify a borrower for the best loan interest rates, while scores below 620 can make it difficult to get a loan. Besides being used by lenders to determine who qualifies for a loan, the FICO score is one of the factors used by property/casualty insurance companies for determining what an individual pays in automobile and homeowner's insurance premiums. Also, employers use a prospective employee's FICO score as one factor for hiring an employee. Unlike the free credit reports, the FICO score is not free. Individuals pay on average $47.85 to obtain their score. FICO scores can be obtained by going to the website www.myfico.com. But that could change. Legislation was introduced in early March 2013 that would give individuals access to free credit scores once a year. Several years ago, the three major credit bureaus, Experian, Equifax and TransUnion, joined together to create a competing credit score, the Vantage score, which some lenders now use. The Vantage score has a scale of 501 to 990. This causes great difficulty in comparing it to the FICO score. But in March, Vantage Score Solution, the entity behind the score, stated that it would produce a new version based on the same 300-850 scale as the FICO. The table at right summarizes the range of FICO scores. Edward A. Zurndorfer is a Certified Financial Planner and Enrolled Agent in Silver Spring, MD. He is also a registered representative with FSC Securities Corporation, branch address: 833 Bromley St. - Suite A, Silver Spring, MD 20902. Phone: (301) 681-1652. Securities offered through FSC Securities Corporation,member FINRA/SIPC. EZ Accounting and Financial Services and FSC are independent companies. Informed Investor Check credit reports, credit scores as part of financial 'spring cleaning' FiCo range individual’s Creditworthiness Classification 700 -- 850 Excellent 600 -- 699 Good 500 -- 599 Fair Less than 500 Poor
April 22, 2013
May 6, 2013