© 2006 Fiscal Progress
INTEGRATING
Free Credit Report Reviews
With Volunteer Return Preparation Programs
Prepared by:
Kenneth Long, AFC
President
Fiscal Progress
© 2006 Fiscal Progress
ii
Welcome volunteer tax return preparers!
We are very happy to welcome those of you that have decided to supplement your
Volunteer Income Tax Assistance (VITA) and Tax Aide sites with financial literacy
components. Tax time is the best opportunity to raise financial awareness due to earned
income tax credits (EITC) and other tax credits that provide sizable refunds. By offering
free credit report reviewing, you are enabling your clients to make better financial
decisions.
This guide provides basic scenarios for implementing the credit report review service to
taxpayers at your site. It provides recommended options based on your volunteers'
expertise on credit reporting and on your available resources and partners.
© 2006 Fiscal Progress. All rights reserved.
Notice: Any commercial use of the images, text or other materials found in this guide is
strictly prohibited without the express written consent of Fiscal Progress.
This guide is provided as a public service of Fiscal Progress and made possible through
the generous support of EITC Carolinas.
Fiscal Progress
3801 Lake Boone Trail
Suite 400
Raleigh, NC 27607
www.fiscalprogress.org
(919) 719-1750
EITC Carolinas
c/o MDC Inc.
PO Box 17268
Chapel Hill, NC 27516
www.eitc-carolinas.org
(919) 968-4531
Fiscal Progress promotes financial
literacy through classes and individual
counseling to low and moderate income
families. Programs include credit and
debt counseling, homeownership
planning, career guidance, budgeting and
volunteer income tax preparation.
EITC Carolinas works to improve the
well-being of low-income working
families. EITC Carolinas is a program of
MDC Inc., a nonprofit organization
focused on expanding opportunity,
reducing poverty, and building inclusive
communities.
© 2006 Fiscal Progress
iii
Table of Contents
I.
Site Coordinators
a. Purpose………………………………………………….... 1
b. Background……………………………………………..... 1
i. FACT Act………………………………………..... 1
ii. Ordering Free Reports…………………………...... 1
c. Getting Started…………………………………………… 2
i. Choosing a Model………………………………… 2
ii. Advertising………...……………………………… 2
iii. Scheduling…………………………………...…… 3
d. Conducting the Sessions…………….…………………… 3
i. Prescreening…………....……….………………… 4
ii. Ordering the Credit Report………………..…….… 4
iii. Reviewing the Report………………...…………… 5
e. Qualifications…………………..………………………… 6
f. Partners…………...….……..…….……………………… 6
g. Technical Assistance……...….………...….……….....…. 7
II.
Consumer Guide
a. Consumer Credit Repair…………………………………. A
i. Credit Basics—Scores.……………………………. A
ii. Factors for Determining Your Score……………… B
iii. Disputing False Information………………………. C
b. Identity Theft Prevention………………………………… D
c. Continued Education…………………………………….. D
d. Frequently Asked Questions……………………………… E
© 2006 Fiscal Progress
1
Site Coordinators
Purpose
Credit Report Reviewing is becoming one of the most sought out forms of financial
education that your organization can provide. Volunteer Income Tax Assistance (VITA)
and AARP Tax Aide sites are natural opportunities to deliver this service to a captive
audience. Improved credit scores will provide consumers lower borrowing rates and
improve their opportunities for homeownership.
Why now? Tax refunds allow consumers unique opportunities to eliminate debt and to
apply down payments toward a new home. This is the best chance most low-income
families have all year to improve their net worth.
Background
The integration of credit report reviewing with VITA and Tax Aide programs is a
relatively new concept. A handful of pilot programs were initiated in 2005 with
remarkable success. Newly implemented legislation has greatly improved access:
FACT Act
The Fair and Accurate Credit Transactions Act of 2003 was fully phased in on September
1, 2005. This supplement to the Fair Credit Reporting Act (FCRA) serves to reduce errors
on consumer credit reports. It requires each of the three major credit bureaus to supply
every consumer with an annual copy of their credit report upon request and without
charge. This report is known as a credit profile, as it lacks the credit score usually
included on commercially requested credit reports.
Ordering Free Reports
The FACT Act mandates a central service that consumers may utilize to order credit
reports from all three main bureaus. It specifies procedures for telephone, internet and
mail requests.
Telephone requests:
(877) 322-8228
Internet requests:
www.annualcredit report.com
Mail requests:
Annual Credit Report Request Service
PO Box 105281
Atlanta, GA
30348-5281
All mail requests require completion of Annual Credit Report Request Form . This is
available at http://www.ftc.gov/bcp/conline/include/requestformfinal.pdf .
© 2006 Fiscal Progress
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Getting Started
VITA and Tax Aide sites can quickly add this service to enhance their current program.
In 2005, two VITA programs conducted pilot programs to work with tax clients on credit
reports and used the two options outlined below. Based on their experience, we strongly
recommend Option 1. Some sites with expanded capacity may find some success with
option 2. Both models work best when the events are held at the same site that taxpayers
have attended.
Choosing a Model
Option 1—Organize a "Super Saturday" event: This will be the best option for most
VITA programs because it makes the best use of time for credit counseling staff and
doesn't require that your site have a very large volume of customers every day. It also
avoids having to ask your tax clients to stay after they have had their taxes prepared. Use
the VITA program and other outreach to let your customers know that they can receive a
free credit profile and talk with a credit counselor on a certain day. Clients may call
ahead to make an appointment and you can also arrange to serve walk-in customers if
you have enough counselors. This can be coupled with information on other services such
as Individual Development Accounts (IDAs), health programs, savings programs and
other asset building educational programs.
Option 2—Offer credit profiles or support during tax preparation: Some tax sites have a
very large volume of tax clients AND have a partnership with a credit counseling agency
that can provide trained counselors to work with clients. In this case, you may offer tax
clients a free credit profile and mini-counseling session on-site. You will also need (1)
separate space where the counselor can talk with the tax client in private, (2) additional
computer capacity with internet access to download credit reports, and (3) a dedicated
printer. In addition the site coordinator must be enthusiastic about the program and is
vital to its success. Some sites with limited capacity reported difficulties using this
option. Large and established sites with on-site credit counseling staff may have a better
chance at making this option work. In this case, a Super Saturday event can also be
added.
Advertising
The single greatest requirement is that the taxpayer associates the credit report review
service with the free tax preparation that they received. Word-of-mouth advertising will
be the most effective tool that you can utilize.
DO:
Advertise the service at all tax sites that you participate in.
Include fliers or handouts with an information package that taxpayers
take home.
Send a mailer to taxpayers that have visited your site.
The DC Cash Campaign of Washington DC used a mailer in 2005 to notify 800 taxpayers
who had visited their tax site of the free credit report review sessions. This survey
© 2006 Fiscal Progress
3
included a cover letter "Do you remember we helped you with your taxes?" along with a
self-addressed stamped envelope. They received 175 responses in 2 ½ weeks.
NEVER: Pressure taxpayers on the day of tax preparation to conduct an
immediate session. No matter your good intentions, some participants
will not respond well to other services on the day of tax preparation.
However, they may be open to services at a later date.
Scheduling
Facility and staff availability will dictate when you can offer the service. You will also
want to consider times and days that will allow your taxpayer clients the greatest
opportunity to attend.
DO:
Host credit report review sessions at the same tax site that participants
attended. It will be familiar to them.
Super Saturdays are best!
Schedule review sessions to last around 20 minutes. Allow for breaks.
NEVER: Schedule for the same day as tax preparation, unless you can meet the
capacity guidelines outlined above under Option 2. This can confuse
taxpayers and volunteers alike.
Overwhelm participants with multiple programs on the same day.
Providing a telephone number allows taxpayers to call and schedule an appointment.
Your survey could include a time range for clients to select preferred appointment times
on the day(s) offered. Place a follow-up call with each respondent to schedule their
appointment. A friendly reminder could reduce missed appointments.
Scheduling can occur year-round and need not be limited to the tax filing period. The
Campaign for Working Families in Philadelphia would like to extend credit reviews and
counseling year-round. This is strongly recommended, especially if your facilities allow
for it.
Conducting the Sessions
Workstations or offices should accommodate individuals, couples and occasionally their
children. Internet access and a printer will be necessary, and a large monitor is helpful. A
private and confidential environment will make sessions more effective. Keep in mind
that joint sessions will take nearly twice as long because there is no combined credit
report for spouses. Spouses may choose to hold joint or individual sessions.
© 2006 Fiscal Progress
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Prescreening
A greeter can assist clients in filling out any preliminary forms. A client information form
will allow clients to provide required information in a format that speeds up the ordering
process. Clients will need to provide the following information:
First Name
Middle Initial
Last Name
Suffix
Date of Birth*
Social Security Number*
Current Address
Previous Address (if moved in last 2 years)
* Great care should be taken with all private information. Forms that include the social
security number and/or date of birth must be safeguarded. Locking storage or confetti cut
shredders are minimum requirements for all sites. To reduce information becoming
compromised, the form may omit the written request for the social security number.
Greeters should always ensure that clients know or have their social security number
available.
Ordering the Credit Report
Your reviewers have two options for pulling a credit report:
(A) Sites may choose to utilize the free online service at www.annualcredit report.com .
In the interest of time, only one credit report per client is recommended. The role of
the reviewer is to facilitate this process with the client. Please note that the credit
score is not included in this free credit report. If utilizing this method, we
recommend finding a sponsor, such as a bank, to cover the cost of adding the score
($5.00 to $6.95). A sponsor can provide a prepaid debit card similar to a gift card to
cover this fee. If the client has already taken advantage of the free report within
the last year, this option will not be available. However, you can use their already
printed report in lieu of ordering a new one if the report is recent.
(B) A standard credit report can be requested through a traditional credit report ordering
service. Most Credit Counseling Agencies utilize a service to pull consumer credit
reports just as lenders might. This report will come from only one credit bureau and
will contain the credit score.
Immigrant taxpayers may file their federal and state return using an Individual
Taxpayer Identification Number (ITIN). This number serves as an identification
number in lieu of a social security number. Credit bureaus do not maintain credit files
on individuals that do not have a social security number. Immigrants can often still
obtain bank accounts, credit cards, automobile loans and even mortgages without this
credit file. Mexican nationals should contact the Mexican consulate to obtain an
identification card known as a matrícula consular which is accepted at an increasing
number of banks and other financial institutions.
© 2006 Fiscal Progress
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Reviewing the Report
Print the report and review it with the client. Clients will be primarily interested in the
score.
Score: Be prepared to discuss with clients how their score compares with others.
Consumer credit report products containing the score will include a chart showing how
the score relates to others. Keep in mind that credit formulas and ranges vary from one
credit bureau to another, making it difficult to provide a one chart fits all approach.
Additional information on credit scoring is included in the Consumer Guide portion of
this guide.
Personal Information: The current address field must be updated if incorrect. Otherwise
companies will continue to send credit solicitations in their name to the wrong address.
This would provide opportunities for identity theft. Many clients will find that their
employment history is outdated. This can also be updated using the normal dispute
channels (discussed below).
Account Information: All creditors that reported account information to that credit bureau
will be listed, along with basic account properties and a history of the account. This
history will include high credit limits, high balances and current balances, terms, type of
account, current status, date opened and date closed if applicable. Sometimes a month-
by-month history will also be displayed.
Specifically you will be looking for negative notations, such as late payments (expressed
as 30, 60, 90+). Your job is to identify these as negative factors, but in a constructive and
positive manner. Some of these clients will have already heard much of the same
information, but in a negative situation such as a loan denial. Negative items are usually
grouped together as Adverse Accounts .
You will also want to identify positive information. Reinforce the positive histories
clients have created with individual creditors. Note that mortgage and auto loans,
combined with one or two major credit card accounts provide an ideal mix of accounts
for a higher credit score. Finance company accounts usually do not improve the credit
score significantly and may even reduce the score in some situations regardless of a
perfect payment history.
Inquiries: Discuss the difference between the types of inquiries. Hard inquiries (regular)
represent credit applications that clients have completed. They document attempts at
obtaining additional debt. Also included in these are credit checks for rental or
employment applications. If you pull the client's report for them, it will appear as a hard
inquiry. Hard inquiries have some limited, negative impact on the credit score. Numerous
hard inquiries can have a greater negative effect, excluding mortgage or auto loan
inquiries. Soft inquiries have zero affect on the credit score. They include account
reviews by a client's current creditors, promotional reviews by prospective solicitors and
any order of credit reports initiated directly by the client with that credit bureau.
© 2006 Fiscal Progress
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Qualifications
Credit report reviewers can be experienced credit counselors or financial professionals
that are familiar with credit. All reviewers should be certified by a reputable accreditation
organization:
Institute of Consumer Financial Education
PO Box 34070
San Diego, CA 92163
Website: www.financial-education-icfe.org
Telephone: (619) 239-1401
Association for Financial Counseling and Planning Education
1500 W. Third Avenue, Suite 223
Columbus, OH 43212
Website: www.afcpe.org
Telephone: (614) 485-9650
Council on Accreditation
120 Wall Street, 11th Floor
New York, NY 10005
Website: www.coanet.org
Telephone: (866) 797-3000
Partners
VITA or Tax Aide sites may find that it is more feasible to partner with another
organization that specializes in consumer credit education. Several volunteer sites that
have successfully integrated credit report reviews with tax preparation have set up
contracts with credit counseling agencies. If your site chooses to partner with another
organization, it is recommended that you develop a written agreement with that
organization. The contract should specify all responsibilities, available technology,
funding and certifications required as well as locations and times if known. Usually, the
credit counseling agency is better equipped to pull credit reports.
Your local Consumer Credit Counseling Service may also be able to provide a similar
service. Contact the National Foundation for Credit Counseling at (800) 388-2227 to
locate an agency near you.
Fiscal Progress will be providing credit report review services and is available
throughout central North Carolina and parts of eastern NC. EITC Carolinas has
generously agreed to fund this service. VITA and Tax Aide sites that would like to
sign up are encouraged to contact Fiscal Progress directly at (919) 719-1750. All
counselors are certified to provide this service.
© 2006 Fiscal Progress
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Technical Assistance
Fiscal Progress will maintain a hotline for technical questions on credit-related issues.
Call (919) 719-1748 to speak with an Accredited Financial Counselor. Technical support
is available weekdays from 9 am to 6 pm. Requests may also be sent to
klong@fiscalprogress.org .
A consumer guide immediately follows this section. It provides specific credit education
that can be shared with a client. Also included is a collection of frequently asked
questions.
Special Note on ID Theft
It is the responsibility of every individual that offers credit report reviewing to ensure the
privacy of client discussion and confidentiality of information. All sensitive information
must be protected. For this purpose, utilizing a confetti-cut shredder is recommended to
reduce the risk of identity theft. EITC Carolinas has distributed several shredders to
nonprofit organizations for use in their tax campaigns. You may contact them if your
organization still needs one.
Also, if you are facilitating the client's order of a free report through
www.annualcredit report.com , we recommend checking the box that limits the printed
social security number to the last four digits.
© 2006 Fiscal Progress
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Consumer Guide
Consumer Credit Repair
You have the same ability to repair your credit report as any credit repair agency. For this
reason, we recommend against paying for a credit repair service. This section will walk
you through the basic influences on your credit score and provide simple steps for
improving your score.
Credit Basics—Scores
Your credit score is a calculation based upon your credit history. It is designed to be a
predictor of your capacity to repay a debt. Fair Isaac Corporation developed the credit
score, also known as a FICO score to help lenders evaluate your creditworthiness.
When you pull your own credit report using www.annualcredit report.com , you are
receiving a consumer product that may be different that the score ranges below. For this
reason, you should expect some variance.
What is a good credit score? ;
FICO Credit Score Implications
720 and higher
A FICO score of 720 and higher is considered excellent. Many
auto manufacturers require a credit score of 720 or more to
qualify for their best rates. You will likely receive approval for
credit applications as long as income and employment
requirements are met.
650-719
A score between 650 and 719 is considered good, and you would
be eligible for good rates on most loans.
600-649
A score in the low 600s would represent higher risk, and
borrowing options would be limited.
500-599
Scores below 600 are considered high risk for lenders, meaning
that your credit application would either be denied, or you would
have to pay a much higher rate. Some sub-prime mortgage
lenders might approve you for a home loan, but at an exceedingly
high rate. This could potentially double your house payment.
499 and below
Scores below 500 represent very poor credit. Utilities would
require significant deposits for new connections, and all
mainstream loan applications would be denied. Purchasing on
credit would not be an option.
Case in point: When I purchased an automobile, I pulled my Equifax Score Power®
credit score. This score was 15 points higher than my Equifax BEACON® score from
a credit report pulled the same day. The consumer product that I purchased uses a
different formula than the one that lenders see.
© 2006 Fiscal Progress
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Factors for Determining Your Score
The two most important things you can do to build and maintain good credit are:
(1) pay all accounts on-time, and
(2) keep all revolving (store & credit card) balances as low as possible.
According to Fair Isaac Corporation, your credit score is composed of the following five
general factors.
Payment
History
35%
Amounts
Owed
30%
Length of
Credit History
15%
New Credit
10%
Types of
Credit Used
10%
If you have a few negative marks, the effect of these will diminish over time. All
accounts eventually drop off after 7 years of inactivity. If you have experienced a
bankruptcy, this will remain on your credit report for 10 years. Making timely payments
is the surest way to build or rebuild your credit.
High balances can be a major score killer. Balances begin to seriously count against you
when they exceed a third of your credit limits. Balances over-the-limit will seriously drop
your score. Steadily paying down a balance can improve your score.
Opening several new accounts will reduce your score. Similarly, even applying for
multiple accounts in a short time period will cause your score to drop.
The types of accounts also have an impact. One or two revolving accounts, along with an
auto loan and mortgage loan create a great mix. Loans from finance companies can
reduce your score, even if they are in good standing.
The time accounts have been open is also a primary factor in determining your score.
Many consumers make the mistake of closing an account after paying it off when they
have owned the account for several years. Cutting the card up is a much better option.
© 2006 Fiscal Progress
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Disputing False Information
The vast majority of consumer credit reports contain at least one error. Many credit
reports contain errors serious enough to cause denial of a home or car loan, or even a job.
If your credit report contains errors, especially fraudulent ones, it is important to act
quickly by disputing the information.
Using your credit report, file a dispute with each credit bureau that lists the error on your
credit report. You may mail a letter to them, but the online dispute process is easy, free
and very fast. Creditors have 30 days to prove the validity of the debt. The easiest way is
to visit their websites (you may gain access and assistance at your public library if you
lack internet access). Be sure to have the confirmation code that appears on your credit
report. Information on mailing or phoning disputes is also included below:
Equifax: www.equifax.com
(888) 766-0008 for disputes
(800) 525-6285 to report fraud
Equifax Information Services LLC
PO Box 740256
Atlanta, GA 30374
Experian: www.experian.com
(888) 397-3742 for disputes and to report fraud
Experian's National Consumer Assistance Center
PO Box 9701
Allen, TX 75013
TransUnion www.transunion.com
(800) 916-8800 for disputes
(800) 680-7289 to report fraud
TransUnion Consumer Solutions
PO Box 2000
Chester, PA 19022-2000
If the creditor fails to verify the dispute, the item will be removed from your credit report.
You will have to dispute the incorrect item with each credit bureau separately. If your
request is denied even though you know the item is incorrect, contact the creditor
directly. Request that they send you immediate proof of the debt.
We strongly recommend against using a credit repair company. If you do decide to take
this route, remember that they are prohibited from taking money from you before the
actual service is rendered. Any early attempt to collect a fee is a red flag. You should
avoid that company altogether. If you feel you need assistance, there are a number of
community organizations that can help you at no charge.
Fiscal Progress www.fiscalprogress.org (919) 719-1750
Local CCCS www.nfcc.org (800) 388-2227
© 2006 Fiscal Progress
D
Identity Theft Prevention
There is no absolute way to prevent identity theft. It can happen to anyone. Developing a
few simple habits is all it takes to substantially protect you from identity theft. Follow
these guidelines:
DO:
Check your credit report at least once a year.
Shred all credit solicitations and documents containing your personal
information.
File a police report if you are a victim of fraud.
Dispute all fraudulent information on your credit report.
NEVER: Throw away important documents with personal information, even if
you have torn them up. Dumpster divers love this!
Respond to a "phishing" email. If a company emails you and asks for
you to verify your personal information, this is an invitation to become
a victim. Always type in the website directly rather than using links.
Respond to scam requests by phone or email to pay taxes on a "lottery"
you never entered.
Fall victim to scams trying to give you money from a lost relative
(commonly referred to as the Nigerian Scam) or some other company
needing your bank account for a transaction. They will simply drain
your account and vanish without a trace.
Identity theft insurance or fraud monitoring is usually a waste of money. Credit
monitoring only sends you emails to report changes to your credit file. You can place a
fraud alert on your credit bureau account for free, which will actually block bogus credit
requests. Several states, including North Carolina recently enacted laws which allow you
to place a security freeze on your credit report. See www.ncdoj.com/id theft .
Continued Education
Additional resources are available to help you improve your credit rating. Please visit the
following resources for more information:
Fiscal Progress
www.fiscalprogress.org (919) 719-1750
CCCS offices
www.nfcc.org (800) 388-2227
Fair Isaac Corporation
www.myfico.com
Equifax
www.equifax.com
Experian
www.experian.com
TransUnion www.transunion.com
Fiscal Progress provides a 1 hour class entitled What's the Score on Credit Scores? This
monthly class is designed for consumers of all credit ratings.
© 2006 Fiscal Progress
E
Frequently Asked Questions
Does an inquiry reduce my credit score? Only inquiries resulting from actual credit
applications or regular credit pulls will reduce your credit score. Usually one will not
have much affect, but several inquiries in a short period of time can cause a reduction of
several points. Other inquiries, including account reviews, promotional inquiries and self-
credit pulls do not change your score at all.
Should I avoid multiple credit checks when buying a car or home? The quick answer
is no. You should get the best rate possible, and sometimes that means applying with
several lenders. Multiple credit requests for an auto or home within 45 days are usually
treated as only one inquiry.
I just paid off my credit card. Should I close the account? If you have had the card for
several years, you should keep it open. It will look favorable to maintain that lengthy
credit history. In addition, if you still carry balances on other accounts, closing that
account will lower your combined credit limit and reduce your score. Feel free to cut the
card up if you no longer need it!
Can credit repair companies fix my credit? These companies, for a fee will do what
you can do for yourself for free. Filing a dispute has become so easy, it is unnecessary to
ask another company to do it for you. In addition, any debt that is proven to be valid by
the creditor will not be removed. In some cases, fraudulent credit repair companies will
try to assign you a new social security number (actually a federal EIN). This is a felony!
I am married. Can I pull a combined credit report? No. Credit reports are available
by individual only. However, accounts held jointly will appear on both spouses' reports.
Should I consider credit counseling? Credit counseling can be beneficial if you do not
understand your credit situation or are experiencing problems. Reputable agencies will
have reasonable fees, be free of complaints and focus on education.
What should I do if I do not recognize a debt? You should dispute any negative item
that you do not recognize. The creditor will have the burden of proof.
How do I repair my credit rating if the negative items are legitimate? The best cure is
making on-time payments. Bring all of your accounts current and you will see a
substantial increase. Your credit score will continue to be somewhat lower because the
previous delinquencies will remain. The impact of these negative items decreases over
time, and they drop off altogether after 7 years.
How does my income factor into my credit score? There is zero impact on your credit
score based on your income. Two people with nearly identical credit histories would have
nearly identical scores, even if their incomes were dramatically different.