The pending financial reform legislation could affect your ability to get a new mortgage, auto loan or credit card because new standards for granting credit will be mandated.  I am referring to the U.S. Senate’s recently passed S 3217 bill, which is commonly known as the financial reform legislation.  It still must be reconciled with a version the House of Representatives passed, but major revisions are not expected.  This legislation has been a top priority for President Obama.

How will this affect you?

First, this legislation addresses a serious concern that people with low credit scores and little income were given mortgages and other types of loans that they shouldn’t have.  The criteria for approval became so low in 2006 and 2007 that many who could not afford their loans got them anyway.  So what does this mean to you?  This means your credit score is now more important than ever.  If you are below a 700 credit score, you should take a serious and hard look into your credit health.  The days of easy credit are over for good.

Second, there will be new regulations increasing criteria for lending.  Things like no-income verification mortgages will no longer exist.  Additionally, under many circumstances, banks will have to assume some of the risk if they sell your loan.  As a result, the documentation and income verification you will need will not only have to match your ability to repay the loan, but must be in good verifiable order.

Third, the time to get larger loans like mortgages will increase.  This is mainly a result of requiring more documentation combined with a new lengthily verification process.

We are entering a new era of credit and financing.   It will affect most everyone as I described above, including small business owners, where their personal credit is essential.

To see a summary of the financial reform legislation click here: http://banking.senate.gov/public/_files/FinancialReformSummary231510FINAL.pdf

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On your credit report, in each of your creditor accounts, is a section called “creditor remarks”. Keep a close eye on this.  Creditor remarks can give you valuable insight in to how your creditors are handling your account.  Certain remarks from creditors can affect your credit score and other remarks won’t.

Today we will examine what it means to have a creditor post “Account information disputed by consumer” in creditor remarks, and if it affects your credit score.

Generally, a creditor posts this remark to your credit report because of an action initiated by you.  Maybe the creditor is reporting an account that is not yours and you are the victim of identity theft, or, there might be an error in the amount owed.

The Fair Credit Reporting Act governs how credit bureaus are required to handle consumer disputes: § 611. Procedure in case of disputed accuracy [15 U.S.C. § 1681i]. They are required to post to the creditor all dispute information within five business days of receipt of your dispute.

§ 623. Responsibilities of furnishers of information to consumer reporting agencies [15 U.S.C. § 1681s-2] (a).3 states that creditors must report “Account information disputed by consumer” if they do not agree with your dispute.  This remark would appear on your credit report within thirty days and stay on your account until it is no longer reported.  Usually accounts are reported for 7+ years.

There is no date when this creditor remark was posted, which means that future creditors will not know if your dispute was a month ago or four years ago.  They will not know if your dispute was directly to your creditor or to a credit bureau.

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SmartCredit.com selected by Finovate as one of Americas top most innovative companies.

On May 11^th, at Finovate Spring 2010 in San Francisco, CA both Jean and I presented Smart Credit’s newest application (‘app’):  the Jean Chatzky Score Builder.  This app is the result of a great partnership between Smart Credit and Jean Chatzky, combining our advanced technology and Jean’s trusted financial expertise.  Together we set out to create a platform for consumers to understand their credit and control it like never before.

Finovate Spring 2010 was a wonderful opportunity for both Jean and I.  Finovate selected Smart Credit as one of America’s top 36 most innovative companies.  They also loved the Score Builder App strategy we were building with Jean.  As a result, we decided to launch the Jean Chatzky Score Builder App at Finovate.  It was great to be on stage presenting with Jean in front of our peers, members of the press and analysts.  They got a chance to see how unique and helpful Score Builder is.

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Three simple rules everyone can follow.

One of the most important things for us as Americans to do is control our credit and protect our identity.   It is entirely our individual responsibility.  For many, credit and online identity can be a complicated and tough concept.

Your credit can be used not only to determine credits and lending, but also for insurance and even for a job.  Your identity, such as your credit card information, social security number, date of birth, address, etc. is stored in thousands of data bases and not all are secure.  It’s easier than ever for identity thieves to take out credit in your name.

How can you take ownership and control your credit and identity?

With these three simple rules:

1.  Review it.

- Look at your updated credit report at least once a month.

- Know your credit score before you apply for credit.

- Carefully review any credit and identity monitoring alert you get.

2.  Control it.

- Make sure your credit report is accurate.

- Ask your creditors to fix errors, settle small debts and get goodwill corrections.

- Also request better interest rates and terms where ever possible.

3.  Protect it

- Ensure you have credit monitoring and identity protection.

- Put these alerts on your mobile smart phone.

- Immediately tell your creditor if an alert is not accurate or is not related to you.

This will help ensure you have the best possible credit score and prevent identity theft.

Where can you do all this?  It’s hard to know which web sites are simple enough to help you easily understand and control it all in one place.

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Your credit score may be a mystery to you, even if you are aware how important it is in your life.  Your credit report and credit score matter more than you think and for more than just getting credit.

Your credit report is a history of all your credit activities.  It will contain your name, address, social security number, date or birth, your employer, your phone number, a list of those who have looked at your credit and everything positive or negative about your credit accounts.

This information is very sensitive and private.  Only those with your express permission or legal need are allowed to view your credit report.

It is your credit report that determines your credit score.  Your credit score is a number between 350 to 850, bad to great.  There are different credit scores which may use a range of 500 to 999.  However, most credit granting decisions are made with the FICO credit score which ranges between 300 to 850.  Your credit score number helps those viewing your credit report understand a lot about you.

Your credit is used not only to help creditors decide whether or not to grant you credit, but can be used as a form of identification, determine your insurance rates and guide employers on hiring, firing and promotion decisions.

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The insurance industry uses your credit report to generate a unique score for their insurance underwriting and claim management. This is called an Insurance Score.

Many auto and mortgage insurance companies look at your credit report, in part, to determine if you are qualified for their lowest pricing plans.

They also look closely at recent financial stress that may hint at possible fraud.  Meaning if you’re maxed out on your credit, you might be tempted to make a false insurance claim.

It is also common that insurance companies will review a policy holder’s credit report to look for sudden financial stress which may spur them to investigate any damage, theft or lost item claim as possible fraud.

If you apply for life insurance over $150,000; your credit report will generally be checked as a matter of procedure.

Depending upon applicable state laws your credit report can even be used to deny you insurance.

Many people believe this practice is troubling.  Especially considering credit reports may have errors and identity theft is the number one complaint to the Federal Trade Commission.  In fact, a growing list of States prohibit the use of your credit report for determining insurance rates.

Smart Credit developed an insurance score that considers many factors insurance companies use to determine rates and possible fraud.  Our insurance score range is between 350 and 850 and this chart will show you how insurance companies may rate you:

SmartCredit.com includes this insurance score at no additional charge.  It’s a great way for you to track how insurance companies may judge your credit for your insurance rates or claims.

How to best prepare for an insurance application and get the best possible rates?

Be proactive!  Make sure your credit report is the best it should be before you apply for insurance.  Use SmartCredit.com to fix errors, get goodwill corrections and settle out debts.  It’s fast and easy with our Smart Action buttons.

David B. Coulter – founder and C.E.O. of Smart Credit

When buying a car most people don’t know their credit score is not used to determine their car loan.  Instead, a different score is used.  It’s something called an Auto Industry Option Score (‘Auto Score’).  This auto score is usually calculated by FICO exclusively for use by auto lenders to determine your loan qualification, down payment and interest rate.

Almost 90% of auto lenders base their lending decision on your auto score. It is calculated primarily on your previous auto loan history and not your overall credit as would normally be the case for a mortgage or credit card.  You would be surprised how many people can get a car loan and not a credit card.

Many lenders are willing to give out auto loans to those with less desirable credit scores. This is because studies have shown people with poor credit histories will generally keep their auto loan payments in pretty good shape all the while letting their other credit go unattended in one way or another.  This is another reason why they need an auto score to better guide their lending decision.

Because lenders are more likely to use your auto score, instead of your credit score, getting an auto loan can be a great way to build or restore your credit. Make those payments on time and begin to build up a positive credit history.

Know your auto score.  SmartCredit.com includes our auto score at no additional charge.  It is heavily weighted on the following credit report factors, which FICO also uses in their auto score:

- An auto loan or lease sent to collections

- Any late payments on an auto loan or lease

- An auto loan or lease settled for less than owed

- A repossession by the lender

- Previous two year overall credit

Smart Credit’s auto score range is between 350 and 850:

How to best prepare for an auto loan application?

Make sure your credit report is the best it should be before you apply for an auto loan.  Use Smart Credit to fix errors, get good will corrections and settle out debts.  It’s fast and easy with our action buttons.

Being proactive with your credit will not only improve your credit score, but will have a positive impact on your auto score as well.  Especially, if you take these actions on your current or past auto loans.

David B. Coulter – founder and C.E.O. of Smart Credit