Credit-score review is identity theft guard

Higher credit scores mean lower mortgage rates.
Consumers should review their credit scores and reports once a year, or several months before applying for a loan, to check for errors, negative data or any suspicious activity that may signal identity theft, Consumer Reports magazine suggests.
Consumer Reports is published by Consumers Union, an independent, nonprofit organization whose mission is to work toward a fair marketplace for consumers.
Looking at mortgages is one way to see how credit scores influence lenders and affect consumers, according to the publication.
As an example, a consumer with a score of 720 and above who is looking for a fixed-rate $150,000 mortgage would get a rate of 5.55 percent. A consumer with a score between 620 and 674 would get a rate of 7.36 percent.
Fair Isaac and Co., a corporation that does analysis, decision management and credit management solutions, developed the scoring system in 1989 to help lenders judge applicants credit worthiness.
Equifax, Experian and TransUnion use the system to calculate a FICO score based on data collected from consumers bank and credit-card companies.
Fair Isaac said the formula involves 22 pieces of data, and the final figure, from 300 to 850, hinges on mathematical models that forecast behavior.
The median U.S. credit score is about 720.
Insurance rate concerns
The organization added that auto and home insurers, employers and landlords look at people's credit scores.
These scores could also be discriminatory according to the Equal Employment Opportunity Commission because it may disproportionately affect some minority groups.
According to Consumer Reports, California has banned the use of credit-based scores in pricing auto policies, and Maryland has banned it for homeowners insurance. Hawaii prohibits it for both, and Massachusetts and Pennsylvania have similar bills pending.

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