HAVE YOU FROZEN YOUR CREDIT?
A “Tech Talk” Extra from John Rudy
No doubt, everyone has heard by now of the 143 million accounts (or more) that were compromised by Equifax. And Equifax’s standing with account holders has taken a massive plunge of more than 35% since the announcement. But have you taken steps to freeze your credit?
It’s important that you make sure that you understand what Credit Freezes are and how they might apply to you.
- Here is useful information from Kim Komando’s blog. See: https://www.komando.com/happening-now/418908/dont-sign-up-for-equifaxs-free-credit-monitoring-heres-what-to-do-insteadutm_medium=nl&utm_source=notd&utm_content=2017-09-11-article-b
- The article noted above (read and print the first 4 pages) explains the situation, and this is MUST reading. This article then references a second article which tells you the steps to follow. Read and print pages 1-2: https://www.komando.com/tips/409259/one-essential-step-to-prevent-identity-theft
- An interesting editorial in the Globe can be found at: https://www.bostonglobe.com/opinion/editorials/2017/09/12/equifax-messed-now-consumers-have-pay/y4wc8cHVI7MHm4KW99KTfN/story.html
I’ve compiled some information here which may prove helpful in understanding this situation.
The FICO Score
The FICO score was first introduced in 1989 by FICO, then called Fair, Isaac, and Company. The FICO model is used by the vast majority of banks and credit grantors and is based on the consumer credit files of the three national credit bureaus: Experian, Equifax, and TransUnion. Because a consumer’s credit file may contain different information at each of the bureaus, FICO scores can vary depending on which bureau provides the information.
Credit scores are designed to measure the risk of default by taking into account various factors in a person’s financial history. Although the exact formulas for calculating credit scores are secret, FICO has disclosed the following components:
- 35%: payment history: This is best described as the presence or lack of derogatory information. Bankruptcy, liens, judgments, settlements, charge-offs, repossessions, foreclosures, and late payments can cause a FICO score to drop.
- 30%: debt burden: This category considers a number of debt specific measurements. According to FICO, there are some six different metrics in the debt category including the debt to limit ratio, number of accounts with balances, amount owed across different types of accounts, and the amount paid down on installment loans.
- 15%: length of credit history: As a credit history ages it can have a positive impact on its FICO score. There are two metrics in this category: the average age of the accounts on your report and the age of the oldest account.
- 10%: types of credit used (installment, revolving, consumer finance, mortgage): Consumers can benefit by having a history of managing different types of credit.
- 10%: recent searches for credit: hard credit inquiries, which occur when consumers apply for a credit card or loan (revolving or otherwise), can hurt scores, especially if done in great numbers. Individuals who are “rate shopping” for a mortgage, auto loan, or student loan over a short period (two weeks or 45 days, depending on the generation of FICO score used) will likely not experience a meaningful decrease in their scores as a result of these types of inquiries, as the FICO scoring model considers all of those types of hard inquiries that occur within 14 or 45 days of each other as only one. Further, mortgage, auto, and student loan inquiries do not count at all in a FICO score if they are less than 30 days old. While all credit inquiries are recorded and displayed on personal credit reports for two years, they have no effect after the first year because FICO’s scoring system ignores them after 12 months. Credit inquiries that were made by the consumer (such as pulling a credit report for personal use), by an employer (for employee verification), or by companies initiating pre-screened offers of credit or insurance do not have any impact on a credit score: these are called “soft inquiries” or “soft pulls” and do not appear on a credit report used by lenders, only on personal reports. Soft inquires are not considered by credit scoring systems.
Credit Bureaus
In the United States, there is no legal term for a credit bureau under the federal Fair Credit Reporting Act (FCRA). A consumer reporting agency is often abbreviated in the industry as CRA.
In this country, two government bodies share responsibility for the oversight of consumer reporting agencies and those that furnish data to them. The Federal Trade Commission (FTC) has oversight for the consumer reporting agencies. And the Office of the Controller of the Currency (OCC) charters, regulates, and supervises all national banks with regard to the data they furnish consumer reporting agencies.
Most U.S. consumer credit information is collected and kept by the four national traditional consumer reporting agencies: Experian (formerly TRW Information Systems & Services and the CCN Group), Equifax, TransUnion, and Innovis (which was purchased from First Data Corporation in 1999 by CBC Companies). These organizations are for-profit businesses and have no government affiliation. Though they are competitors, they are all members of a trade organization called the Consumer Data Industry Association (CDIA) to establish reporting standards and lobby on behalf of their industry in Washington. Current reporting standards accepted by the four U.S. CRAs are Metro and Metro2. The Metro2 standard is defined in the annual CDIA publication, the Credit Reporting Resource Guide. Consumers are entitled to a free annual credit report from each of the three nationwide consumer reporting agencies—Equifax, Experian and TransUnion. Consumers can go to annualcreditreport.com, the Internet site maintained by the three companies, to get their free reports.
Equifax Inc. is a consumer credit reporting agency. Equifax collects and aggregates information on over 800 million individual consumers and more than 88 million businesses worldwide. Founded in 1899 and based in Atlanta, Georgia, it is the oldest of the three largest American credit agencies. Equifax has US$ 3.1 billion in annual revenue and 9,000+ employees in 14 countries. It is listed on the NYSE as EFX.
In September 2017, Equifax announced a cyber-security breach, which it claims to have occurred between mid-May and July 2017 where hackers accessed more than 143 million U.S. Equifax consumers’ personal data, including their full names, Social Security numbers, birth dates, addresses, and, in some cases, drivers license numbers. Equifax also confirmed at least 209,000 consumers’ credit card credentials were taken in the attack. The company claims to have discovered the hack on July 29, 2017. Residents in the United Kingdom and Canada were also impacted.
A long-time computer expert and guide, John provides his helpful hints in this monthly BOLLI Matters feature. In the comment box below, provide questions or comments for John on any computer/tech topic .
john.rudy@alum.mit.edu (781-861-0402)