The Consumer Information Indicator (CII) identifies three specific types of information about a consumer’s credit report.
The CII contains information about bankruptcies, personal receiverships, and reaffirmation of debt.
The CII also contains payment history, and the most recent date on each account.
Bankruptcy
Bankruptcy is a legal process that can give people a fresh financial start when they’re unable to pay their debts. Depending on the type you file, the bankruptcy court can eliminate or reduce your debts, halt a foreclosure or repossession, stop wage garnishments, utility shut-offs and other collection activities, and create a repayment plan.
The process is usually managed by a trustee who can sell or take possession of the bankrupt’s assets in order to distribute their proceeds. This includes your house, car, and other assets up to a certain value.
If you’re thinking about filing for bankruptcy, you may want to seek professional help to ensure you do so in the right way. Your lawyer can explain the process, advise you of your rights and protect you from any unwanted creditor action. They can also assist you in deciding which bankruptcy chapter is best for you.
There are two types of bankruptcy: Chapter 7 and Chapter 13. Both can help you get a fresh start with your finances, but they have different effects on your financial situation.
When a consumer files for bankruptcy, their credit report is updated to reflect the new status of their accounts. The information will stay on their credit report for up to a decade, which can impact how lenders view them.
The negative information that’s listed on your credit report can affect how much you’re able to borrow and the interest rates you pay on new loans. It can also make it more difficult for you to secure a mortgage and other large-dollar loans.
Seeing a bankruptcy on your credit report can affect how lenders view you and may result in them declining to extend you credit or offering you less favorable terms than you might be eligible for. It can also negatively affect your ability to obtain a mortgage or home equity loan.
The CII reports three kinds of information about an account: whether the consumer has filed for bankruptcy, which type of bankruptcy they have filed (discharged or dismissed), and if they have any special conditions on their accounts. It’s important for creditors to ensure they are reporting all of this information correctly and in a timely manner so that they can meet their reporting obligations under the Fair Credit Reporting Act.
Personal Receivership
Personal receivership is the appointment of a third party (often a professional) to manage a business or property in a situation where it may be unable to meet its financial obligations. Receivers are often called upon in bankruptcy proceedings, business and partnership disputes and at the request of government regulatory agencies to seize businesses accused of fraud or illegal activity.
A receivership can bring about a number of significant changes to a company’s operations, finances and property. For example, a receiver can improve project management, marketing and advertising, accounting and reporting by bringing an objective perspective to the business.
One of the most important changes a receiver can make is to terminate an existing borrower’s association with an account. This can be done by either a formal court order or an unofficial settlement agreement. Regardless of how the account is terminated, it should be reported with the appropriate Consumer Information Indicator.
The best way to handle this type of reportable event is to use the L1 Segment to report a new Account Number and/or Identification Number. Alternatively, a servicer or other department may report the change in a segment-specific format.
As with most CRA-related matters, the most important part of any such event is to inform consumers about the event and to provide them with the appropriate information to assist them in their decision making process. The most effective way to do this is through the use of a clear and conspicuous notice, such as a postcard or a written letter. This should include an explanation of the most important aspects of the event as well as a brief explanation of how to use the information to the consumer’s advantage.
Credit Card Inquiries
Credit card inquiries are an important part of credit reporting. They show whether a consumer has been using their credit wisely or not. They also help lenders and others to evaluate the consumer’s financial situation.
Unlike soft inquiries, which are not tied to an application for credit, hard inquiries indicate that someone is applying for a new line of credit, such as a loan or credit card. This can have an impact on your credit score, although it typically only affects your score for a year or so after you apply for a new line of credit.
Most people know that applying for a mortgage, auto loan or student loan will trigger an inquiry on their credit report. But they may not be aware of how many other types of inquiries can damage their credit scores and how long those inquiries stay on their reports.
While one credit card inquiry is not necessarily a bad thing, multiple credit inquiries in a short period of time can cause damage. This is because FICO credit scoring models don’t collapse all of your inquiries into a single inquiry — it considers each one separately.
In addition, hard inquiries are often triggered by an application for a credit card or loan, so it’s crucial to shop around before you commit to something. Doing this can help you find the best card that suits your needs and won’t harm your credit score.
Some credit card companies offer prequalification tools that let you check your likelihood of qualifying for a particular card without hurting your credit score. While these prequalification tools aren’t always accurate, they can give you a better idea of whether or not you will be approved for the credit card.
Similarly, when it comes time to renew your insurance policies, the insurance company might make an inquiry on your credit report to set your policy’s renewal rate. This is a soft inquiry that doesn’t have a significant impact on your credit score.
If you have a large number of hard inquiries on your credit report, contact one of the many credit repair services available to dispute them. They can often get them removed from your credit report sooner than you might think.
Credit Card Usage
Credit card utilization rates, also called credit utilization ratios, are a key indicator of a consumer’s spending habits. They are calculated as a percentage of the total amount of available revolving credit a consumer has, or what is known as their “credit limit.” Your overall utilization rate can affect your credit scores, and it can be influenced by the timing when your credit card companies update your balance information with the credit reporting agencies.
Generally, experts recommend keeping your credit card utilization rates below 30%. However, there are some exceptions. For example, if you have a low credit limit, it may be worth opening a new credit card to help boost your credit utilization rate.
According to the CFPB, more than half of households carry credit card balances–and about 60 percent of those have revolving accounts. This number fluctuates widely from year to year, with the peak occurring in 2007 just before the financial crisis.
One factor that has been contributing to higher revolving balances is chronically cash-strapped households, which are more likely to use credit cards as a last resort. These consumers rely on their credit cards to cover basic expenses such as meals and clothing, but they also use them for big-ticket items like homes, cars and vacations.
Many of these borrowers end up carrying large, persistent revolving balances that require ongoing attention from their credit card issuers and high interest costs. As a result, many of them are not able to pay their bills and may end up defaulting on their debt.
Another common factor is low minimum payments, which have been in place since the 1980s and 1990s. They typically require payment amounts of at least 5 percent of outstanding balances plus interest and fees.
These lower payments have led to persistent revolving balances and high interest charges, causing cardholders to spend more of their income on interest and fees than they pay back on their purchases. This phenomenon is a major reason why credit card issuers have raised their annual fee prices.
Using the Consumer Information Indicator is a good way to identify these families and provide them with the resources they need to make their payments. It can also help merchants better understand their customers’ spending patterns, which can lead to greater sales and a stronger revenue stream.
