Action Line: Credit card history has big impact on credit report, score
BY PHIL MULKINS World Action Line Editor
Sunday, January 06, 2013
1/06/13 at 4:22 AM
Dear Action Line: How important is "credit card payment history" when a person's "credit score" is computed? My daughter can't seem to pay hers on time and laughs it off when I warn her about the effect this will have on her credit score and her ability to get loans. - C.T., Tulsa
A study released Dec. 13, 2012, by the Consumer Financial Protection Bureau shows that credit reports are dominated by consumers' credit card histories, said Bill Hardekopf, CEO of LowCards.com. The report - "Key Dimensions and Processes in the U.S. Credit Reporting System: a review of how the nation's largest credit bureaus manage consumer data" ( tulsaworld.com/CFPBNCRAs) - also shows that "debt collection" items generate the highest rate of disputes.
The bureau analyzed 2011 information from the three largest nationwide consumer reporting agencies (NCRAs) - Equifax, TransUnion and Experian - each of the agencies having more than 200 million files on consumers.
"Today's study is another step toward bringing more clarity to the confusing world of credit reports," bureau director Richard Cordray said. "It will help educate regulators and consumers on how this important industry works."
"Credit reports play an increasingly important role in the lives of American consumers," the report summarizes. "Most decisions to grant credit (mortgage loans, auto loans, credit cards and private student loans) consider credit report information. Credit reports are also used in eligibility for rental housing, setting premiums for auto and homeowners insurance in some states or determining whether to hire an applicant for a job.
"As the range and frequency of decisions that rely on credit reports have increased, so has the importance of assuring the accuracy of these reports. These NCRAs are the hub of the national credit reporting system. Other entities reporting information on borrowers to NCRAs are providers of public records information, and all play roles affecting information accuracy reported in such reports."
Report findings: Only 20 percent of consumers (44 million) obtain copies of their credit reports as permitted by federal law (one free copy of each report from each NCRA ( tulsaworld.com/acr) - 58 percent of the information on credit reports comes from credit card companies, 40 percent from bank cards and 18 percent from retail credit cards - 7 percent comes from mortgage lenders, and 4 percent comes from auto lenders.
NCRAs resolve just 15 percent of consumer-disputed items internally. The other 85 percent are passed to data furnishers. Documentation consumers mail in to support their cases might not be passed to data furnishers for them to properly investigate and report back to NCRAs - 40 percent of debt collections disputes and most credit report information is provided by a small number of financial institutions and banks. The 10 largest data furnishers provide 57 percent of the trade lines coming to NCRAs.
Original Print Headline: Credit card history a big impact on score
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