Understanding Your Credit
Equifax, Experian, and TransUnion are the three leading credit reporting agencies In the U.S. Each manages information about you and your credit history. This information is gathered on an ongoing basis from many sources that have extended you credit.
What Your Credit Says About You
Most people finance their homes with mortgages and pay for their card with loans. Young people often obtain loans to pay for college. And of course, lots of people make purchases with Credit Cards.
You can't expect to receive credit as a matter of course, however. You must apply for it. And just as you would hesitate to lend money to a stranger, banks, retailers, or finance companies will not grant your credit without knowing something about you.
It used to be that a retailer or bank would have to call each creditor you listed on an application form before they would decide to extend credit to you. Today, they rely on credit reports, so it's important for you to know what is in yours.
What is a Credit Report?
A credit report is a record of your credit activities. It lists any credit-card accounts or loans you may have. The balances, and how regularly you
make your payments. It also shows if any action has been taken against you because of unpaid bills.
Where Do Credit Reports Come from?
A company that gathers and sells credit information is called a consumer reporting agency (CRA). These types of companies collect information about your credit activities, store it in giant databases, and charge a fee for supplying the information. The most common type of CRA is the credit bureau. There are three major credit bureaus that operate nationwide, plus many smaller companies serving several local markets.
What Is a Credit Rating?
Your credit rating is drawn from your credit report, which outlines your borrowing, charging, and repayment activities. A good rating helps you reach financial goals; a poor rating limits your financial opportunities. Since your credit report influences whether you are able to buy a home and get a job, it is extremely important to protect your credit rating by making loan and bill payments on time and by not taking on more debt than you can handle.
Who Is Allowed to See Your Credit Report?
Credit bureaus can provide information only to the following requestors: (1) Creditors who are considering granting or have granted you credit;
(2) employers considering you for employment, promotion, reassignment, or retention: (3) insurers considering you for an Insurance policy or
reviewing an existing policy; (4) government agencies reviewing your financial status or government benefits; and (5) anyone else with a
legitimate business need lor lhe Information, such as a potential landlord.
Credit bureaus also furnish reports if required by court orders or federal Jury subpoenas. They will also Issue your report to a third party if you request this in writing.
What Type of Information Is on Your Credit Report?
There are usually four types of information:
1. Identifying information: Your full name. Any known aliases, current and previous addresses, social security number, year of birth, current and past employers and if applicable, similar information about your spouse.
2. Credit Information: The accounts you have with banks, retailers, credit-card issuers, utility companies, and other lenders (accounts are listed by type of loan, such as mortgage, student loan, revolving credit, and installment loans, the date you opened the account, your credit limit or the loan amount; any co-signers of the loan; and your payment pattern over the last two years)
3. Public Record Information" state and county court records on bankruptcy, tax liens, or non-monetary judgments as well).
4. Recent Inquiries: The names of those who have obtained copies of your credit report within the past 2 years (two years for employment purposes)
Where do the Consumer Reporting Agencies Get Their Information?
Credit bureaus collect information from parties that have previously extended credit to you such as a dependent store that issued you a card or a bank that granted you a personal loan.
Who decides whether or not to Grant You a Loan?
The Lenders themselves make the decision about whether or not to grant you credit. The credit reporting companies only supply the information about your credit history.
Why should You Obtain a Copy of Your Credit Report?
To avoid any unwelcome surprises, it's important to see a copy of you credit report before you apply for credit such as car loans, mortgages, or credit cards. Errors in credit reports can be common. Keep in mind however, that they are no part of a conspiracy against you. They are simply the result of human error.
How Do Errors Happen?
Think about how often your mail has a misspelling of your name or a mistake in your street address. Then imagine the possibility for error in a report that contains much m ore information about you. Cases of mistaken identity, out-of-date information, and outright errors can easily occur.
How Do you Correct and Error on your Credit Report?
Contact the consumer credit agency immediately. The company is then responsible for researching and changing or removing the incorrect data. This process may take as long as 45 days. At your request, a corrected report will be sent to those parties that you specify who have received your report within the past 6 months, or employers who have received it within the last two years.
What if the Consumer Reporting Agency Stands by its Report?
You have the right to present your side of the story in a brief statement (100 words or less) which the credit bureau must attach to your credit file. Your statement should be used to clarify inaccuracies, not explain reasons for delinquency. Anyone requesting a copy of your credit report would also automatically receive your statement (or a summary), unless the credit bureau decides that it is irrelevant or frivolous.
Late and missed payment will show up on your credit report and hurt your changes of being approved for credit, life insurance, or employment. To find out about organizations in your area that help consumers solve credit problems and create a budget, contact the National Foundation for Consumer Credit at 800.388.2227. Spanish speakers can call 800.682.9832.
How long Does information Stay on Your Credit Report?
Generally, all your credit history information, good or bad, remains on your report for seven years,. UIf you file for a personal bankruptcy, that fact remains on your credit report for 10 years.
How do you get a Copy of Your Credit Report?
You may write, call, or request a copy of your credit report via the internet from all three major credit bureaus.
You will need to provide information such as your name, current and previous addresses, telephone numbers, social security number, and date of birth. Also, to verify your identity, other information such as a copy of your drivers license, utility bills, or bank statement may be required. If you are married, be sure to include the same information for your spouse. Keep in mind that the three large bureaus do not necessarily share information with each other. The content of your credit report can be different at each bureau, so it's a good idea to request copies from each one.
There is usually a charge for reports unless your request come 60 days of having been denied credit, employment, or insurance as a result of a credit report. Credit bureaus also provide free copies of your credit report under the circumstance. You are entitles to one report free of charge per year. If you certify in writing that 1) you are unemployed and plan to look for a job within 60 days; 2) you are on welfare, or 3) your report in inaccurate because of fraud.