Is an Online Credit Report or a Mailed Credit Report Safer?

With Internet crime on the rise---the Federal Bureau of Investigation's Internet Crime Complaint Center reached the 2 million-complaint mark in 2010---consumers have legitimate reasons be concerned about the safety of pulling a credit report online. This fear, however, is unfounded. Except in a few rare cases, online credit reports are almost the safest way to receive one.

Identification

Online credit checks are the safest way to request a report, according to Experian, one of the major credit bureaus in the U.S. The major credit bureaus all use secure servers that encrypt data as does the Annual Credit Report website, which provides every consumer in the U.S. a free credit report from each of the three major credit bureaus annually. Mailed reports, on the other hand, are usually much easier to compromise. The mailman, for example, could accidentally deliver it to the wrong address or a thief might steal it from a mailbox.

Considerations

It only makes sense to order a report via mail when the consumer's identifying information is different from that in the bureau's database or the customer cannot pass a verification test. The bureaus require customers to answer questions about their financial background to verify their identity, such as how much the consumer pays in monthly debt charges. If the customer cannot answer this information he must verify his identity by mail.

Considerations

A major part of identity fraud involves a human intercepting a person's private data. A common email scam, for instance, involves the fraudster sending out messages purporting to come from the consumer's financial institution. Online reports transfer almost instantly and even if a thief were to intercept the encrypted communication in that small time frame he would need special software to decode it.

Tip

Customers that run a report through someone other than the major credit bureaus or Annual Credit Report should research the security of the site. Secured websites have an address that starts with "https" and a lock icon at the bottom of the browser, warns PrivacyMatters.com. Also, reputable companies have a clearly stated privacy policy that includes actions the consumer can take if he feels the company uses his data in violation of the privacy agreement.

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What Is an Experian Plus Score?

When you apply for a loan, credit card or other form of credit, the lender invariably "runs your credit." What the lender finds out helps determine whether to approve your application and, if approved, what terms, such as interest rate, will apply to your account. The Experian Plus Score is one of several credit scores that lenders can use to aid their decision.

Types

Largely because there are so many different types of them, credit scores trigger great confusion among consumers. The most widely used score, according to Smart Money magazine, is the FICO score, devised by the Fair Issac Corp. Your FICO score is a measure of your creditworthiness, based on the data contained in your TransUnion and Equifax credit reports. The Experian Plus Score, used by some lenders, is developed by Experian, the third major credit bureau. Experian, along with TransUnion and Equifax, developed the Vantage Score--which, reports Kimberly Lankford, an editor at Kiplinger's Personal Finance, aims to compete with the FICO score.

Function

While some lenders, though it is unclear exactly how many, use the Experian Plus Score to make credit decisions, Experian positions its score as a way to educate and empower consumers. At its website, Experian notes that the company developed the Plus Score to help individuals better understand their credit and how it impacts them. Experians contend that it is "user-friendly" and "consumer-focused."

The Score

Experian says the formula it uses to come up with its Plus Score is based on information from a consumer's credit report, "using a similar formula to those used by lenders." Experian says the score ranges from 330 to 830. A higher score is associated with a lower credit risk and vice versa.

National Score Index

Experian publishes data it calls the "National Score Index," based on its Plus Score. At its website, the credit bureau allows users to compare Plus Scores at several levels of analysis. Input your ZIP code to see how Experian Plus Scores and other credit statistics compiled by Experian compare between your area, state, region and the nation. For instance, the average Experian Plus Score in Chicago's 60611 ZIP code, according to population sample drawn by Experian, is 696. This compares to the Illinois average of 699, the "East North Central Region" average of 698 and the U.S. average of 692.

Expert Insight

Maxine Sweet, who answers credit-related questions at Experian's website, thinks you should not pay too much attention to the number that is your credit score. Rather, Sweet believes you should focus on where you rank in relation to other consumers in terms of credit risk. Analyze the factors that bring your credit score down, she suggests. Reporting agencies usually provide a list of these factors when you buy a credit score--any one of them--online. Adequately address these factors, advises Sweet, and you have the best chance of improving your creditworthiness.

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How to Improve Credit Score Due to Identity Theft

Identity theft can drastically harm your credit score. A near-perfect 800 score can fall into the 500s very easily thanks to identity theft. You can take action if your identity has been stolen. While the best solution is to guard your identity so that you will not have to resort to these methods, you can improve your credit after identity theft.

Instructions

1

Notify Equifax, Experian andTransUnion (the three major credit bureaus) of the identity theft in writing.

Equifax
P.O. Box 740250
Atlanta, GA 30374
888-766-0008

Experian
PO Box 9532
Allen TX, 75013
888-EXPERIAN

TransUnion
P.O. Box 6790
Fullerton, CA 92834
800-680-7289

Make sure you send a notification of the identity theft to each major bureau. While each bureau will inform the others, it a good idea to proactively contact all three, given the sensitivity and time-critical nature of identity theft.

2

Place a security freeze on your accounts. After you have notified the credit bureaus of the identity theft, you can freeze your credit report so that you will be notified before any significant changes to your credit report occur.

3

Notify the Federal Trade Commission (FTC) of the identity theft. This will allow you to defend your credit score by forcing new accounts opened by the criminal to be shut down.

4

If the criminal has used your credit card, thus harming your credit score, you can improve your credit score by notifying the card's issuing bank of the identity theft. After you issue a fraud report, it will remove the fraudulent activity.

5

Tell collection agencies of the pending identity theft issue if they attempt to collect bills related to the fraudulent activity. This will prevent your credit score from dropping further as a result of the identity theft.

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Free Yearly Credit Rating

A credit report is an official record of an individual's credit history. These reports include information on a person's mortgage loans, credit cards, automotive payments and student debt, as well as negative financial history such as foreclosures, bankruptcies and accounts in collections. The three major credit bureaus -- TransUnion, Experian and Equifax -- use the data on a person's credit report to determine her "credit rating," a three-digit number which helps lenders decide a person's creditworthiness. Federal law entitles all U.S. residents to an annual free copy of their credit reports from each of the three credit bureaus.

Order Online

One way for individuals to order their free yearly credit reports is to visit Annual Credit Report, the official credit report ordering website. On this website, individuals enter their home states, then fill in their personal information including their names, addresses and Social Security numbers, into the official order form. People may instantly view their credit reports from all three credit bureaus from the Annual Credit Report website.

Order by Telephone

Individuals who would prefer not to order online may order their credit reports by calling 1-877-322-8228, the official annual credit report order hotline. Persons calling the official hotline must provide detailed personal information, including their names, addresses and Social Security numbers. Individuals who order their free yearly credit reports by telephone will receive reports from all three credit bureaus within 15 days, according to the Federal Trade Commission.

Order by Mail

Consumers also have the option of ordering their free yearly credit reports by sending an official Annual Credit Report request form to the Annual Credit Report Request Service. Individuals must fill out the form completely, and will need access to personal information, including their Social Security numbers, dates of birth, addresses and full names. Similar to ordering by telephone, individuals who order their yearly credit reports by mail will receive their reports from all three credit bureaus within 15 days.

Considerations

Instead of ordering credit reports from all three bureaus at once, individuals can choose to order credit reports from just one or two agencies. The Federal Trade Commission says many individuals choose to stagger their credit report orders over a 12-month period, which allows them to get pictures of how their credit profiles change over time. Additionally, free yearly credit reports do not include information on individuals' credit ratings. People wishing to know their credit ratings must pay fees to order them from each of the three credit bureaus.

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The Importance of a Credit Rating

A credit rating is a measure of how much of a risk it would be to lend money to a person, business of other entity. Your credit rating directly affects your ability to borrow money. In addition, it may be used to determine your reliability as an employee or tenant.

Credit Scores

For individuals, your credit rating is summed up in a credit score, or FICO score. Scores range from 300 to 850; the better the credit rating, the higher the score.

Interest Rates

The better your credit rating, the lower the interest rate you're likely to pay on borrowed money---everything from a mortgage or a car loan to the rate on your credit cards. If your rating is bad enough, however, you may be denied credit entirely.

Background Checks

Employers and landlords often perform credit checks before hiring or renting to a person. A history of late or missed payments suggests that potential employee or tenant could be unreliable and create problems down the road.

Explanations

Credit reporting agencies allow you to include a letter in your file explaining negative entries in your credit history. Such letters won't improve your credit rating, but they may influence the way lenders look at that rating.

Other Entities

For companies and governments, credit ratings are summed up in a debt rating, which measures the risk on bonds issued by that entity. The scores range from D (in default) to AAA (the best), and the higher the rating, the lower the interest rate that the issuer has to pay to investors.

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If You Pay Off the Debt Collectors, Will Your Credit Score Go Up?

Debt collectors can make life miserable for people who owe old bills. The Fair Debt Collection Practices Act forbids them from certain tactics, like making false threats or using obscene language, but they can verbally apply pressure. Collection accounts also lower a consumer's credit score, making it hard to get new credit at competitive interest rates. Paying off collection accounts raises the score under certain circumstances.

Definition

Every person who uses credit has a credit score from FICO and the three credit reporting agencies. All are three-digit numbers calculated from credit report information, according MyFICO.com. Lenders use them to assess if applicants are likely to pay back new accounts as agreed. Good data like long-term accounts with low balances and timely payment histories support a high score. High debt, erratic payments and charged-off accounts that were sold to debt collectors pull down the number and make it harder to get more credit.

Considerations

According to MSNMoney.com, lenders sometimes insist that applicants pay off old collection accounts before they grant credit. This requirement is especially common for large loans like mortgages. The loan is not granted until the old obligations are cleared up.

Process

Debt collectors buy old accounts at steep discounts, so they frequently accept less than the actual amount owed. They still earn a profit because they paid so little for the account. Consumers can use this to their advantage by negotiating lower settlements in exchange for having the debts erased from their credit reports. Collectors are more likely to agree to a discount when offered a lump sum rather than a payment plan.

Warning

Do not pay a bill until the debt collection puts the agreement in writing. The document should include the amount of the settlement, a promise that it will be accepted as payment in full for the debt and an agreement to remove the credit report entry when payment is made. Credit scores can still go down if a person pays an old debt and the collector does not remove it. The debts only loose their effect when they are removed.

Time Frame

Old credit card bills and other accounts can only stay in a person's credit history for seven years, according to the Federal Trade Commission. The time frame starts as soon as the account becomes delinquent, and it does not restart if the account is eventually turned over to a debt collector. Old debts do not affect credit scores very heavily if a consumer concentrated on keeping newer accounts in good standing. Accounts that are at least five years old may not be worth paying off if they are not impeding the ability to get more credit, since they will disappear within a couple of years.

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How Long Should Delinquent Credit Stay on a Credit Report?

The Basics

A credit report is an official record of all your credit-related actions over a specific period of time. On your credit report is a list of checking and savings accounts, credit cards, loans, and other things of this nature. Also reported on your credit report is any delinquent credit you may have. Your credit report is used by lenders to determine whether or not they want to give you new lines of credit, and the information contained in it is taken into very careful consideration when those decisions are made.

Collections

Generally speaking, if you are three to four months late paying a bill or loan, a record of your delinquency is sent to a collections agency. While a late payment can appear on your credit report after 30 days, going 90 to 120 days is when it starts to be considered "Delinquent Credit." These organizations specialize in getting people to pay back money they owe that they have stopped making payments on. Delinquent credit stays on your credit report for seven years. This is the same amount of time a simple late payment stays on your credit report. This will have a negative effect on your credit rating which will result in applications for things like loans and credit cards being denied.

Charge Off

After extended periods of time collection agencies can offer you what is called a "Charge Off." This is when they agree to allow you to pay less than you owe to settle your debt. Just like with delinquent credit, a charge off remains on your credit report for seven years. Charge offs are a red flag for potential money lenders as not only does it show you were delinquent on credit payments for an extended period of time, but it also shows that your previous lender did not recoup all of their money.

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