ACA American Citizens Abroad

Individuals who have financial transactions in the US create a credit history which can affect their ability to obtain loans, use credit cards, etc. in the future. Sometimes, as in the case of identity theft, you can have a "credit history" you didn’t generate yourself!

A credit report includes information on where you live, how you pay your bills, and whether you've been sued, arrested, or filed for bankruptcy. Nationwide consumer reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.

Federal legislation, the Fair Credit Reporting Act (FCRA), requires each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months. Each of these companies may have different credit information concerning you.

Incorrect information can creep into your report, affecting the cost of future credit to you. It is VERY important to review your credit report for any errors. If any errors are noted (e.g. wrong Social Security number, inaccurate previous home addresses, open collection accounts reported that have in fact been paid, open accounts after a bankruptcy, unauthorized accounts opened), the consumer should immediately dispute the information with the credit bureau. DO NOT WASTE YOUR TIME CALLING THE CREDITOR (it will only raise your blood pressure). The creditor will be notified immediately by the credit bureau of your problem. The credit bureau will send you, within 60 days, the response from the creditor to your dispute inquiry.

Credit report – credit score

When you request the free credit report, the nationwide consumer reporting companies will offer you the opportunity to PURCHASE (for ca. $10) your credit "score". Your credit score is based on information in the credit report, and it is on the basis of that score that lenders will determine whether to grant you credit, and at what cost. 

Credit scores range from 300 to 850 (the nationwide average is 620). The higher your score, the better credit risk you are perceived to be.

What factors affect a credit score?

• Punctuality. 35% of your credit score is affected by late or missed payments, foreclosures and bankruptcies.
• Limit your debt. 30% of your credit score is based on the amount you owe in relation to your credit limit. Ideal is to keep your account balances below 50% of your credit limit
• Avoid excessive inquiries. 10% of the credit score is related to the number of recent requests for credit made. Several new credit requests in a short period of time can reduce your score.
• Keep accounts open. 15% of your credit score comes from how long you have been managing credit. Closing old accounts – especially ones with a good payment history – shortens your credit history and lowers your score. Lenders take into account the average age of your accounts, so an older account can help balance newer credit.
• Credit mix. 10% of your credit score depends on the types of credit you are using (mortgage, credit card, car loan, retail card, etc.). 

Dottie Parker, a career loan officer, says: "A consumer's credit score has NOTHING to do with their income, employment or location of residency. It is based 100% on their previous and present ability to repay their debts in a timely manner. Is important to remember your credit history is reported for up to 10 years. I have seen many college professors who have much lower credit scores than local farmers. The lower the balance a consumer keeps on their credit card(s) the higher their credit score."

How can you check your credit report?

Only one website is authorized to fill online orders for the free annual credit report you are entitled to under law — www.annualcreditreport.com . If you access the above-mentioned nationwide consumer reporting companies online, their offer of a free credit report is linked directly to this site. HOWEVER, the site is blocked to servers from outside the United States and its territories.

The good news is that one can download the form for requesting credit reports from the Federal Trade Commission site at: www.ftc.gov and mail it to:

Annual Credit Report Request Service
P.O. Box 105281
Atlanta GA 30348-5281
USA.

(Sources for this article: www.ftc.gov , the Indiana University Credit Union, and Dottie Parker of North Country Savings Bank)