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All About Credit Reports

Your credit score is based on the information found in your credit report as collected by the three national credit bureaus (Equifax, Experian, and TransUnion). Each piece of credit-related data contributes either negatively or positively to your overall credit score.

Understanding what goes into a credit score, how to read a credit report, and the importance of monitoring and actively managing your credit can make an important difference in your eligibility for credit. This section of FAQs provides a strong foundation of information to get you started on the right foot.

Why is there an inquiry from Birchwood on my report?

What every consumer should know about credit reports.

How are credit reports produced?

Where does credit information come from?

What is a credit score?

How can I improve my credit score?

When I apply for a loan and get approved, can I make purchases without endangering my home loan?

I pay my bills on time, why is my score so low?

I have a good job and pay cash for purchases, but my credit score is still low.  How can I raise it?

Can I get it corrected faster?

Why is the information different at Equifax, Experian, and TransUnion?

How long does a collection account or judgment of bankruptcy stay on my report?

I have inquiries on my report that I do not recognize. What can I do?

I have information on my report that is not mine. What should I do?

Can I get a copy of my credit report from Birchwood?

Why is my credit report mixed with my relatives or others with similar names or addresses?

I do not have any credit.  How can non-traditional credit help me?

My credit report is in English.  Can I get my report in Spanish?

 

Let me remind you that credit is the lifeblood of business, the lifeblood of prices and jobs. – Herbert Hoover

 

Why is there an inquiry from Birchwood on my credit report?

Birchwood is a reseller of credit reports. The credit information that we provide on our reports is provided to us by the three major credit bureaus (Equifax, Experian, and TransUnion). Birchwood never initiates a credit inquiry. Only approved Birchwood customers, like a mortgage broker or mortgage banker, may request a credit report through our system on a consumer who has given his or her permission to pull a credit report.

If an inquiry on your credit report from Birchwood is not connected with a loan or home purchase that you authorized either online, in person, or by phone, please call us at 800-910-0015 to verify who ordered the credit report on your behalf.

 

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What every consumer should know about credit reports

Your credit report affects your financial health, but does it affect your daily life?

Your credit score is based on the information found in your credit report as collected by the three national credit bureaus (Equifax, Experian, and TransUnion). Each piece of credit-related data contributes either negatively or positively to your overall credit score. The resulting credit score is used (with greater and greater frequency) in automated decision-making systems that various credit grantors across the country use to determine your eligibility for credit.

You may already be aware that your credit score can affect your ability to get a home loan and can also influence the terms under which this loan may be made available to you (including interest rate, down payment obligation, points paid, and more). But did you also know that …

  • Your credit score can affect your auto insurance rates.
  • Your credit score affects which credit card offers you receive in the mail (and the interest rates they offer).
  • And, of course, the information in your credit report affects the interest rates and payment terms for auto loans and other big-ticket item purchases.

All of these day-to-day financial realities are based on your credit score.

Credit report scoring models are very precise, yet the process of credit grantors reporting millions of tradelines (account information) to the credit bureaus creates a potential for errors. This is why all consumers should understand three little-known keys to credit health:

  1. How credit reporting works
  2. How credit scores work
  3. What steps to take to monitor and correct credit report in the event of errors

Start now. Take control of your credit health.

 

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How are credit reports produced?

There are four basic steps in the creation of a credit report:

  1. Birchwood receives a credit report order from our customer, usually a mortgage broker or mortgage banker.
  2. We then transmit the borrower's information (name, address, and social security number) to one or more of the three major credit bureaus.
  3. The major credit bureaus send the raw credit data back to Birchwood and our system compiles the information (usually from all three credit bureaus) into a single report.
  4. This report is then provided to the mortgage broker.

Additional information is always being added to your credit report. Sometimes, incorrect information appears on your credit report and you need to file a dispute in order to remedy the situation.

Birchwood cannot change anything on the credit reports provided by the major credit bureaus from the initial inquiry. However, upon request from a customer (via a mortgage broker or lender) and upon verification of the information, changes can be made to the Birchwood report. Mortgage brokers and mortgage bankers will request updates to ensure that a lender has the most recent and correct information, enabling them to approve the loan. Common credit dispute requests include verifying if an account has been paid, verifying that an account does not belong to the consumer, or updating the current status of an account.

Birchwood does not make permanent changes to the information maintained by the three major credit bureaus but we can expedite the process of the major bureaus. The process requires certain documentation and must be initiated by a Birchwood mortgage broker on behalf of a consumer.

Start now. Take control of your credit health.

Get all the facts and manage your credit report for better interest rates and better financial terms. You may be able to save yourself thousands of dollars in wasted charges starting this year.

 

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Remember that credit is money. – Benjamin Franklin

 

Where does credit information come from?

Credit report information comes from credit grantors across the United States, such as auto and home lenders, banks, retail stores, and credit card companies. Information is also collected from other sources such as court records where information on bankruptcy filings, tax liens, and judgments is collected. Employment information is also collected.

 

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What is a credit score?

A credit score is a number that represents the statistical probability of the individual in question becoming delinquent on a loan. Credit scores range from 300 to 900, with the majority of scores falling in the range of 500 to 750. Credit scores were developed by a company called Fair, Isaac & Company (FICO).

The scoring models created by FICO use all the detailed information contained in your credit report to produce your credit score. The calculation uses different weights and factors contained in the FICO scoring models, resulting in a credit score, which is used by the lender to determine credit eligibility.

Fair Isaac has its roots in risk assessment. The first purpose of the FICO score is to show how likely you are to become at least 90 days late in making payments in the next 24 months based upon patterns in your credit history, compared with the payment patterns of millions of past consumers.

The general scoring range is 350-850. Fair Isaac divides the scoring range into five risk categories:

  • 780-850 Low Risk
  • 740-780 Medium-Low Risk
  • 690-740 Medium Risk
  • 620-690 Medium-High Risk
  • 620 and Below High Risk or "sub-prime"

Many years ago, Fair Isaac reviewed hundreds of thousands of credit reports on consumers that had no delinquency on their credit reports and compared them to hundreds of thousands of consumer credit reports that had delinquency on their files. By doing this Fair Isaac was able to determine many factors that existed on credit files that were very strong predictors of a consumer's future ability to repay a loan.

Each of the three major credit bureaus uses their own proprietary version of the FICO credit-scoring model. Each of these models is updated by Fair Isaac from time to time to improve their predictability.

As of early 2004, Fair Isaac said that this was how US consumers' FICO scores were distributed nationally:

  • 800 or higher 11%
  • 750-799 28%
  • 700-749 19%
  • 650-699 16%
  • 600-649 12%
  • 550-599 8%
  • 500-549 5%
  • 499 and under-1%

With Fair Isaac's estimates, almost 60% of U.S. consumers are qualifying for top-notch credit, with credit scores of 700 or above.

Today, most loan decisions use credit-scoring models to determine eligibility for credit, interest rate, terms, down payment amounts, and other terms of the loan. Automated underwriting systems help our national credit industry improve the speed and efficiency of the decision-making process, enabling it to process hundreds of millions of loan decisions each year. Because of this, millions of Americans can buy homes, cars, and other major items on credit in a matter of minutes rather than the months it would take without the availability of the credit reporting system.

Credit scores can have a very real financial impact on your life. Birchwood recommends that all consumers become familiar with how credit scores work and how they can be improved with good credit management.

 

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How can I improve my credit score?

There are many online sources that can provide information on attaining and maintaining a high credit score. You can check out the information contained at www.myfico.com as well as the websites of the three major credit bureaus: Equifax, Experian, and TransUnion.

You can also ask your mortgage broker or realtor about CreditXpert. This service is a low cost custom report that looks at your credit report, searches for opportunities to improve your score, and provides estimates for score improvement, predicting the actual number of points your score will improve based on the recommended actions.

 

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Procrastination is like a credit card: it's a lot of fun until you get the bill. – Christopher Parker

 

When I apply for a loan and get approved can I make purchases on credit before closing without endangering my home loan?

Borrowers often make the mistake of assuming the loan process is complete from the credit standpoint before the closing, and then make significant purchases on credit (such as for furniture or a car). They are subsequently surprised to find that their credit score has dropped and the lender is now requiring different loan terms prior to closing.

It is best to not open any new credit accounts during the mortgage or loan refinance process.

 

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I pay my bill on time each month. Why is my credit score so low?

Many people who have perfect payment history on all their outstanding credit accounts have low scores. This is because credit scores are not based solely on payment history. There are, in fact, many other factors in the FICO scoring models that can have a negative impact on your score. For example, if you have credit accounts that have high balances in proportion to the credit limits on your accounts (a $4,000 balance on a credit limit of $5,000), this can activate a negative factor that can lower your score.

A lower than expected score can also be related to a creditor reporting information in error, or perhaps someone using one or more of your credit accounts fraudulently. Sometimes, being turned down for credit is the first warning a consumer has of fraudulent activity, such as identity theft. This is just one more reason to review your credit report on a regular basis.

 

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I have a good job and pay cash for my purchases, but my credit score is still low. How can I raise my score?

Many consumers that do not use credit regularly wind up with low credit scores or no credit score at all. In some cases, lenders will work with you for loans based on what is known as non-traditional credit. In this case you would gather evidence of payment on everyday bills that you have paid as agreed that usually do not get reported to the credit bureaus – things like utility bills and rent payments.

The three major credit bureaus will not add this information to your file and will not include this information to generate a credit score, but there are lenders that will work with this type of credit information to approve a specific mortgage loan. Because your credit score can affect so many parts of your life, it is very important to establish a positive credit history as soon as possible.

 

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Can I get it corrected faster?

The Credit Bureau Update (quick score) program enables Birchwood to update many types of consumer credit information with the national bureaus in only 5 to 7 business days. Birchwood forwards borrower documents directly to Equifax, Experian, and TransUnion for rush investigation.

What types of credit information can be updated?

  • Remove derogatory information and accounts that are in error
  • Update an account that has been paid in full and closed
  • Update the status of a collection
  • Update a balance or paid-in-full status
  • Update an account to show inclusion in a bankruptcy

What documentation is required?
A quick score requires verifiable documentation from the creditor:

  • All documents MUST be typed on letterhead from the creditor reporting the account.
  • Documents should state specifically how the information should be changed and include the date, complete account number, and name and phone number of the creditor contact.
  • Documents pertaining to collection accounts must be from the collection agency listed on the credit report, not the original credit grantor.
  • We cannot accept handwritten letters, originals or copies of cancelled checks, or money orders.

The credit bureau has the final determination on acceptability of all documents.

How does the CBU program work?
The process is quick and simple:

A quick score request must be faxed with a Birchwood quick score fax cover sheet and the appropriate documentation. A Birchwood representative verifies the document before forwarding it to the requested bureaus. Each bureau then verifies the document and notifies Birchwood that their update has been completed. Once all requested bureaus have notified Birchwood, we will: a) where a credit report is less than thirty (30) days old, re-pull the borrower’s credit report and download it into the broker or lender mailbox, or b) where the credit report is more than 30 days old, notify the broker or lender so that they may re-pull.

Occasionally, a bureau may not accept the documentation. We notify the requesting broker or lender as soon as the bureau advises us. In that case, the consumer will need to follow the standard 30-day dispute procedure with each bureau.

How long does it take and what does it cost?
Though we are unable to guarantee a completion date, the turn-around time is typically 5 to 7 business days from the time Birchwood receives a request. If the bureau rejects the documents we provide prompt notification.

Important Notes:

  • Birchwood is not permitted to call the bureaus to request an estimated time of completion.
  • Updating credit bureau information does not guarantee an improvement in the consumer’s risk score. A quick score is dependent on many circumstances that are beyond Birchwood’s control, so we are unable to guarantee service on every quick score request. The bureau being queried always has the final determination.
  • The credit bureaus stipulate that the consumer is not to be charged, either directly or indirectly, for the quick score service.

 

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The most important thing for a young man is to establish a credit... a reputation, character. – John D. Rockefeller

 

Why is the information at Equifax, Experian, and TransUnion different?

Credit grantors provide information to the credit bureaus. However, no credit grantor is required to report their information to all three of the major credit bureaus. Sometimes, depending on the credit grantor, they may only report their accounts receivable data to one or maybe two of the bureaus based on geographic location or other criteria. This is why sometimes information will be shown on one bureau's file and not on another.

 

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How long does a collection account or judgment of bankruptcy stay on my credit report?

  • Collection accounts and all other credit report information stay on credit files for 7 years.
  • A bankruptcy stays on a credit report for 10 years.

How recent information is can be a big determinant of credit score results. Having a previous bankruptcy is not always a roadblock to getting a home loan, especially if it occurred more than 3 years ago.

If you have a collection account on your credit report that is older than 3 years, pay it off after you seek a home loan. If you pay it off beforehand, you will bring the account’s “date of last activity” into the present, which could lower your credit score.

 

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I have inquiries on my credit report that I do not recognize. What can I do?

Many inquiries are made by companies looking to make offers of credit to you, like credit card companies. These types of inquiries do not affect your credit score. Nor do credit report inquiries made by you. If there are inquiries on your report that you do not recognize, contact the major credit bureaus directly.

 

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I have information on my credit report that is not mine. What should I do?

You may be a victim of identity theft, fraud, or simply a mixed file. You should contact the credit grantor immediately and also contact all three major credit bureaus  for more information on what actions would be appropriate.

 

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He that hath lost his credit is dead to the world. – George Herbert

 

Can I get a copy of my credit report from Birchwood?

Birchwood provides consumer credit reports directly through our affiliate relationship with Equifax, but we do not sell credit reports directly to consumers.

You can request to review your credit report with your mortgage broker who obtains it on your behalf. Your Birchwood mortgage broker can show you your mortgage credit report for purposes related to the loan process.

 

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Why is my credit report mixed with my relatives or others with similar name or address?

The three major credit bureaus cannot rely solely on a consumer’s Social Security Number in searching for a credit file. The first identifier used is the name of the consumer and then the address. This is where "junior and senior" files sometimes get mixed. For those borrowers that share their home address with other members of the same family it is possible for the credit to get mixed because the names are similar and the address is the same. If this is the case, you can contact the credit bureau reporting the error for assistance.

 

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I do not have any credit. How can non-traditional credit help me?

Non-traditional credit helps establish a file for an underwriter to see credit history. It usually consists of showing a regular, on-time payment history for everyday bills like utility and insurance bills.

Although non-traditional credit will not generate a credit score, there are FHA guidelines that will allow a loan to be underwritten if there are non-traditional accounts added and verified. This works well for people with no established credit.

In some cultures where credit usage is not seen as a positive; non-traditional credit is a useful tool. In addition, younger people without previous credit history can benefit from non-traditional credit. When your mortgage broker works with Birchwood, we perform the verifications that underwriters require for that purpose.

Call us at 800-910-0015 to locate a mortgage broker that works with Birchwood.

 

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My credit report is in English. Can I get it in Spanish?

Birchwood offers free Spanish translations on all credit reports ordered through Birchwood. Your Birchwood mortgage broker can show you your mortgage credit report for the purpose of asking questions related to the loan process, and can provide this report in Spanish if you request it.

 

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