If you think that all three credit-reporting bureaus have files on you, think again. Despite what you have possibly been led to believe, you may have one, two or three credit reports. As an example of this, we read recently of a woman who applied for a mortgage only to learn that she had just one credit report.
The Fair Credit Reporting Act
A few years ago, our Congress passed the Fair Credit Reporting Act that was meant to dictate how information is supplied to the three credit reporting agencies. However, there’s nothing in the law that says lenders are required to report information to them. While the major banks generally report information on you to all three credit bureaus, credit unions and small local or regional banks might not report to all three of them. And there are some lenders and others who don’t report at all.
What this means to you
Let’s say that you apply for mortgage and the lender learns that you have no credit reports. The good news is that you would still probably be able to get that loan because your lender would likely put you into one that’s backed by the Federal Housing Administration. This would allow it to use what’s called “non-traditional” credit data such as your history of making payments on your rent or on your utilities, cable, or cell phones. The key here is to have at least three of these accounts that have been opened for 12 months or longer.
A tougher way to go
Using nontraditional credit data is a harder way to go because it would require you to do a lot more work. Plus, there may be other conditions applied such as an income minimum and you might be required to have two months’ of mortgage payments in reserve. If you fall into this non-traditional category, it’s important that you find a mortgage pro that has done these kinds of mortgages in the past.
Increasing your credit history
As an alternate to this, you might need to put off your plans to buy a home and work on improving your credit history. You can do this fairly quickly by becoming an authorized user on one of your family member’s or friend’s existing credit cards – assuming that person has an excellent payment history. Make sure you check that the credit card company does report that account to all three bureaus. This can be helpful because as soon as you do become authorized, your friend’s or relative’s complete payment history on that card will go on your credit reports.
Beyond this, here’s a video with helpful tips about building credit when you have no credit reports or history.
Contact the three credit bureaus
If you’re concerned that you might not have credit reports from all three of the credit bureaus Experian, Equifax and TransUnion – contact them and ask if they have credit files on you. You can reach them either online or by calling their toll free numbers. In the event you find that not all three have your credit reports, you could go back to your bank or credit union and ask that it began reporting to all three of the credit bureaus. However, this might not help. For the credit bureau to take your information, your lender must have an account set up with it. This costs money and your bank or credit union might not be willing to spend the money help you.
What else you could do
If you find that your bank or credit union can’t help, you might open a credit card from a different credit union or take out a small loan at a national bank that does report to all three of the credit agencies. But it will take six months before FICO takes that new account into consideration in computing your credit score.
Do you know your credit score?
If you don’t know your credit score, you need to learn it. Whether we like it or not, credit scores dictate our ability to get credit and what we pay for it. You can get your score “free” from any of the three credit reporting bureaus or from sites such as CreditKarma.com. You may have to jump through some hoops to get it “free” such as signing up for a trial of a credit monitoring service. Unfortunately, this won’t be your true FICO score, which is the one most lenders rely on. Instead, you might get your VantageScore, which was developed by the three credit reporting bureaus. In any event, you should get a score close enough to your FICO score to know where you stand in terms of your credit worthiness.
Where to get your FICO score
If you want to know your true FICO score, there’s only one place where you can get it. That’s on the site www.myfico.com. You could get your score free if you sign up for a free trial of the company’s Score Watch program or buy it for $19.95.
FICO scores range from 300 to 850. This is like your SATs or ACT scores as higher is better. If you have a score above 700, you should be able to get that mortgage or auto loan with no problem. On the other hand, if your score is less than 580, you may have trouble. Many lenders are reluctant to lend money to people with scores that low. And if you were able to get credit, it would likely be a loan that comes with a much higher interest rate, which would cost you extra money over the long run. This is especially true if you were trying to get a mortgage. While an additional two or three points more in your interest rate might not seem like a very big deal, it will cost you literally thousands of extra dollars over the life of that mortgage.