© 2011 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. The basics of credit reporting

© 2011 Experian Information Solutions, Inc. All rights reserved. 2

3 The Fair Credit Reporting Act Credit reporting companies are governed by the Fair Credit Reporting Act (FCRA) enacted in 1970, revised effective October 1997, amended December 2003 by the Fair and Accurate Credit Transaction Act (FACT Act)

© 2011 Experian Information Solutions, Inc. All rights reserved. 4 The benefits of credit reporting Credit reporting companies serve consumers and businesses by making possible: Instant credit Lower-cost credit Nationwide credit Widespread availability Account management

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6 The three national credit reporting companies Experian Equifax Trans Union There are some independent local or regional credit bureaus that provide direct consumer assistance but whose data resides with one of the national credit reporting companies

© 2011 Experian Information Solutions, Inc. All rights reserved. 7 Requesting your personal report Experian Equifax P.O. Box Atlanta, GA Trans Union P.O. Box 1000 Chester, PA

© 2011 Experian Information Solutions, Inc. All rights reserved. 8 Sources of reports for consumers Consumer reporting companies Referred by adverse action notices Fraud Unemployed and seeking employment Receiving welfare assistance Free reports under some state laws Purchase additional reports FACT Act Centralized Source Consumer direct services

© 2011 Experian Information Solutions, Inc. All rights reserved. 9 Centralized source for free reports One every twelve months Single contact point Telephone Mail Internet Fee for credit score disclosure

© 2011 Experian Information Solutions, Inc. All rights reserved. 10 You pay lender Credit reporting companies share with new lenders Lender updates records Lender shares history with credit reporting companies The credit cycle

© 2011 Experian Information Solutions, Inc. All rights reserved. 11 Credit reporting companies are like libraries Credit reporting company clients check out information … … If they have a permissible purpose under the law

© 2011 Experian Information Solutions, Inc. All rights reserved. 12 The Fair Credit Reporting Act Permissible purposes Open or manage credit accounts Offers of credit Employment purposes Underwrite insurance A business transaction initiated by the consumer Court order or federal jury subpoena Valuation of risk of an investor Eligibility for government license Disclosure to consumer

© 2011 Experian Information Solutions, Inc. All rights reserved. 13 The players in the credit cycle You Credit reporting companies Lenders Risk score modelers The government

© 2011 Experian Information Solutions, Inc. All rights reserved. 14 Information comes from you Information you provide in an application for credit, housing, or insurance is reported to credit reporting companies Credit Application Jonathan Q. Consumer Birch St. Burbank CA 91502

© 2011 Experian Information Solutions, Inc. All rights reserved. 15 Information comes from you

© 2011 Experian Information Solutions, Inc. All rights reserved. 16 Whats in a credit report? Identifying information Account information Public record information Inquiries Dispute instructions

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© 2011 Experian Information Solutions, Inc. All rights reserved. 18 An important note about inquiries There are two different types of inquires: Inquiries shown to potential creditors Inquiries shown only to the consumer

© 2011 Experian Information Solutions, Inc. All rights reserved. 19 How long is information retained? Open accounts in good standing Closed accounts in good standing Late or missed payments Collection accounts Civil judgments Chapter 7 bankruptcy Chapter 13 bankruptcy Unpaid tax liens Paid tax liens Credit inquiries Indefinitely 10 years 7 years 10 years 7 years 10 years 7 years 2 years

© 2011 Experian Information Solutions, Inc. All rights reserved. 20 Whats NOT in a credit report? Credit reporting companies do not store: Criminal background Medical information Buying habits / transaction data Bank account information Credit risk scores

© 2011 Experian Information Solutions, Inc. All rights reserved. 21 Initiating a dispute Must get report directly from Experian Toll-free number on report gives you access to customer service Report number identifies you and your record You and customer service representative will be looking at the same information in the same order Can dispute online, by telephone or by mail Dispute must be specific

© 2011 Experian Information Solutions, Inc. All rights reserved. 22 Processing a dispute Credit reporting company verifies with the source of the information (creditor or court) Must allow up to 30 days for processing Source verifies, corrects or updates Secure electronic mail system is used Creditors required to report corrections to all databases Consumer can add statement of dispute if issue is not resolved with source

© 2011 Experian Information Solutions, Inc. All rights reserved. 23 Beware of credit repair companies Cant legally do anything you can do for free Cant legally collect fee before delivering the promised service Cant legally advise you to lie about your accounts or about your identifying information

© 2011 Experian Information Solutions, Inc. All rights reserved. 24 Common myths about credit reporting When paid, the bad debt will go away The credit reporting company denied me credit Im not responsible for those charges on our account A divorce decree separates joint accounts Consumers must give their permission for a report to be issued (employment is the exception) Requesting your own report and preapproved offers harm your credit history There is only one credit risk score and it is on every report

© 2011 Experian Information Solutions, Inc. All rights reserved. 25 Automated credit risk scoring Used instead of a manual score sheet Valuable risk management tool Many different models available from many different sources Credit reporting companies often apply the model selected by the creditor when delivering the credit report; however, the credit scoring model, or formula, is proprietary to the developer and is not known by the credit reporting company

© 2011 Experian Information Solutions, Inc. All rights reserved. 26 Risk factors are the key Generated when a risk score is calculated Tell the consumer what to address in their credit history to become more creditworthy Are largely consistent from model to model Are usually included in or described in an adverse action notice Experian provides both positive and negative factors to consumers with scores it provides through its direct-to-consumer services

© 2011 Experian Information Solutions, Inc. All rights reserved. 27 Mortgage and auto loan inquiries Credit scoring systems recognize multiple inquiries may be made for a single mortgage or auto loan and adjust for that type activity For example, in many models inquiries for those purposes are counted as a single inquiry within any rolling 14-day period, minimizing or eliminating any impact on credit scores

© 2011 Experian Information Solutions, Inc. All rights reserved. 28 There is no silver bullet You cant fix the number Address the risk factors in your credit management and every risk score will improve Time is the key

© 2011 Experian Information Solutions, Inc. All rights reserved. 29 Resources Free annual FACT Act credit report Access to free report from each of the three credit reporting companies Experian credit education Ask Max advice column, sample consumer report, frequently asked questions Experian Credit Educator: Experian Credit Educator Personalized review and guidance about your credit report and score by an Experian professional for a nominal fee. Access to credit monitoring and unlimited Experian credit reports and scores Purchase a scored report and learn about scores Free online service for consumers to compare low rates on monthly bills and reduce the cost of living Free online comparison shopping service to help consumers find lowest prices for goods and services Assistance in locating college education resources Vehicle history reports to help consumers ensure they make good pre- owned auto purchasing decisions Education partners

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