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What is a credit report?
Whenever you apply for any type of credit or financing, a credit
report is pulled from at least one of the three major credit bureaus.
These credit bureaus collect and maintain information on the
vast majority of Americans, but they are not affiliated with the
government in any way.
The credit bureaus receive your personal information through
the same lenders who grant you credit. They have agreements with
each of these credit grantors that require the credit grantor
to inform the credit bureaus of everything that occurs in your
relationship with the credit grantor. If you make a payment late,
the negative credit listing is quickly reported to at least one
of the three major credit bureaus and is added to your credit
history. Credit reports are not just a record of how you are currently
managing your credit accounts. Credit reports are histories of
everything you are doing with your credit now, and everything
you have done in the past.
The credit bureaus collect this information, list it on your
credit report, then sell it to other credit grantors who wish
to see your credit history before they decide to lend you money.
The credit grantors who review your credit are especially interested
in any negative credit. If you have shown any tendency to pay
late, or to disregard your financial commitments in the past,
then the creditors' computers will immediately reject your application.
What kind of information appears on the report?
Merchant Trade Lines
These include all regular credit lines such as department store
cards, auto loans, mortgages, and credit cards. If there is any
history of late payment, or if the trade line was included in
bankruptcy, charged off, or put into repossession, the listing
will be considered negative by all credit grantors.
Collection Accounts
When an account is referred to collections because of delinquency
or because of a bad check, this appears on the credit report as
a collection account. Collection accounts can appear as paid or
unpaid accounts. Any type of collection account, whether paid
or not, is considered very negative by all credit grantors.
Court Records
Court records include bankruptcies, judgments, liens, divorce,
satisfied judgments, and satisfied liens. All court records, including
satisfactions, are considered negative by all credit grantors.
Inquiries
Every time a potential credit grantor looks at your credit file,
a credit inquiry appears on at least one of your credit bureau
reports. If the numbers of inquiries are few over the last two
years, then there may be no negative effect on your credit worthiness.
However, if there are many recent inquiries showing on your credit
report, credit grantors may become nervous and deny you credit.
Who looks at my credit report?
With the passing of each year, your credit report is used more
and more often as a yard stick to measure your character. Prospective
creditors will always review at least one of your credit reports
before granting you credit. Today it is increasingly common for
insurance companies to review your credit before extending auto
or health insurance. Many employers now check credit before they
consider you for a position. If you rent, you may have already
been through a credit check to determine your worthiness as a
renter.
How long do negative items stay listed?
The Fair Credit Reporting Act (FCRA) requires that most negative
credit items be deleted from your credit bureau file in no more
than seven years, except for bankruptcy, which can be reported
for up to ten years. These are the time limits for reporting negative
credit. The creditor or the credit bureau can choose to have the
negative credit information deleted whenever they please. Inquiries
may remain on the credit report for up to two years.
Who can request information about my file?
Under the Fair Credit Reporting Act, a credit reporting company
may only disclose your credit report if someone is:
a. Granting credit, reviewing your account, or collecting on
your account.
b. Reviewing you for employment purposes.
c. Reviewing your application for insurance.
d. Reviewing your eligibility for a license or goverment-related
benefits.
e. Providing information for a business transaction, such as
renting an apartment.
f. An IRS subpoena.
g. A court order.
h. Someone to who you have given written permission.
How often are mistakes entered into my credit file?
Frequently! Some experts say that as many as 90% of credit reports
contain errors! That is inaccurate, incomplete, or misleading
information that can cost you the credit you deserve.
Who will remove items from my credit report?
Only the credit bureaus have the power to remove items from your
credit report. But, as required by law, the credit bureaus must
delete inaccurate, unverifiable, or outdated information.
How can I add positive data to my credit report?
Since the Fair Credit Reporting Act does not require creditors
to report information about you, many do not. That means positive
information may not be reported. As long as the positive information
is verified, it can be added to your credit report.
Is "file segregation" legal to clear
my credit?
A number of companies have been offering to give consumers a
"fresh start" with their credit histories. These companies
seek to obtain a second Social Security number or federal ID number
of their clients. This is commonly referred to as "file segregation."
File segregation is a fraudulent practice and violates many Fedral
and State Laws.
How does information about me get into my credit
report?
When you agree to accept credit from a bank, most retail stores,
etc., or fill out an employment application - if a credit report
is used as a background check - you give the creditor the right
to provide information to any credit reporting company. Additional
information about you comes from public records, such as court
records, debt collection companies, and even the utility companies.
How do the credit companies work?
The banks, retail stores, utility companies, etc., report your
payment record to the credit reporting companies each month. The
credit reproting companies then give that information to a second
tier of regional reporting companies who sell it to retailers,
banks - anyone who legitimately requests information about you.
Why do credit bureaus have separate reports for
husband and wife?
The credit bureaus collect information based on individual social
security numbers. Only by checking both the wife's and husband's
credit reports can we ensure accuracy.
No. Each of the three reporting companies' reports look different
and may not contain the same information. The companies maintain
their own databases and do not often share information.
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