Credit Reporting Services: What you need to know

Credit reporting agencies/bureaus
A credit reporting agency or bureau exists to compile, maintain, and sell information about consumers' credit histories to interested parties. Information is collected from many sources, such as banks, credit unions, retailers, and finance companies. Data is then sold to potential creditors as a credit report. By law, a credit grantor is allowed to view your credit report to help them decide your risk and whether or not to give you credit. It is simply a document that contains a factual record of an individual's credit payment history. Credit reporting agencies do not help lenders decide whether or not to give you credit; they simply provide the data.

In the United States, there are three major credit bureaus that provide nationwide coverage of consumer credit information: Equifax, Experian, and Trans Union. (Note that in Canada there are two: Equifax and Trans Union). Make sure you check your 3-in-1 credit report regularly as all bureaus do get reports from various creditors. Interestingly, most large national lending institutions report consumer credit information to all three bureaus, but smaller banks and other credit grantors may report to all three, two, one, or even none of the bureaus. This is why your credit report from one bureau may be different from that from another.

Info contained on the credit report
There are four types of information on the credit report, as follows:

1. Identifying information includes your name, current and previous addresses, Social Security number, year of birth, current and previous employers, and (if applicable) your spouse's name.

2. Credit information includes credit accounts or loans you have with banks, credit card issuers, retailers and other lenders. Most information (positive or negative) stays on your credit report for 7 years from the date it is first reported, then cycles off automatically. Note that if you find inaccurate information on your report, you can dispute it and have it removed.

3. Public record information includes any information contained in state and county court records, including monetary judgments, tax liens, and bankruptcies. Note that this information can remain on your report for up to 7 years (bankruptcies up to 10 years).

4. Inquiries show credit grantors that you have applied for new credit that could result in additional debt. In other words, a potential lender could see multiple recent inquiries as a possible red flag that you may be overextending yourself. Most inquiries stay on your credit report for up to two years.

Note as well that a credit risk score might also appear on the report when it is sold to a credit grantor, although it is not included on a consumer report.

Credit risk scores
A credit risk score is an evaluation of your credit worthiness based on a statistical analysis of the information on your credit report. The most common type of score is the FICO score, which is calculated using complex math formulas that assign values to various pieces of information in the credit report. The score provided by a credit bureau is purely relative, and credit grantors use them to objectively evaluate your credit-worthiness. Your risk score will change as your credit history evolves over time.

Other types of credit reports
Mortgage reports: When deciding whether or not to grant a mortgage loan, a lender may purchase a mortgage report from a mortgage credit reporting company. The company compiles credit reports from 2-3 credit bureaus and then manually verifies specific information, including employment, credit account balances and public record information.

Employment reports: This is a modified credit report used to help potential and current employers make hiring and promoting decisions. It contains information from the credit report but excludes your year of birth, marital status, and account numbers.

Who has access to my credit report?
In the interests of privacy, federal law carefully regulates how credit reports can be used and by whom. You have the right to see your own report. Businesses can only access credit information if they meet the following requirements:

• Background Proof of a permissible purpose under federal law
• Check and on-site inspection of the business
• Current business license
• Signed contract requiring the business to use the data properly

Correcting credit report errors
If you find an error on your credit report, do whatever you can to fix it immediately, since the information will stay on your report for up to 7 years. Note, though, that you need to get the creditor that actually made the mistake to get the negative information removed. Ask the creditor in writing to write to the credit bureau explaining the problem. If the issue is not resolved to your satisfaction, challenge the credit bureau directly. The law requires the creditor and the credit bureau to help resolve the issue within 30 days. Also, after the error has been fixed, ask the credit bureau to send a revised report to anyone who has asked for it within the last six months.

Fixing a bad credit history
If your credit report is accurate, you simply have to wait for the ‘black marks’ to drop off. In the meantime, though, take action on ensuring that your current and future credit is not jeopardized. Show creditors that you are able to pay off new debts on time. If credit card companies have rejected you, consider signing up for a secured credit card, which have a credit limit equal to an amount of money you deposit in a savings account.

Contacts for Credit Bureaus:

Equifax
www.equifax.com
Information Service Center
P.O. Box 740241
Atlanta, GA 30374-0241
1-800-685-1111

Experian (TRW)
National Consumer Assistance Center
www.experian.com
P.O. Box 949
Allen, TX 75013-0949
1-888-EXPERIAN (1-888-397-3742)

Trans Union Corporation
www.transunion.com
Customer Disclosure Center
P.O. Box 390
Springfield, PA 19064-0390
1-800-888-4213

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