Your Credit Report

The three major credit bureaus in the United States are Experian, TransUnion, and Equifax. These companies acquire data from banks, credit unions, mortgage lenders, and retail establishments. They also search court records for lawsuits, judgments, and bankruptcy filings and review county records for tax, judgment, mechanics, or other liens (legal claims).

Credit bureaus provide reports to creditors, insurance companies, employers, landlords and anyone else who has a legitimate need for the information so they can make well-informed lending and business decisions.

 

Credit Report Information

A credit report is divided into four sections: personal identification, trade lines, public record, and inquiries. When reading your report, make sure that the information in each area is accurate.

Personal identification. Most reports begin with your personal identification information. It will list your name and any former names or aliases, your current address and former addresses, and sometimes your employment history and marital status.

Trade lines. The bulk of a credit report is dedicated to your history of handling credit. It includes:

  • Creditors and account numbers
  • The date accounts were opened
  • Credit limits or original balances
  • Whether accounts are individually or jointly held
  • Balances and payment patterns for the last 24 to 36 months
  • If accounts are in collections or in dispute

Public records. The public records section will report information about lawsuits to which you are a party, liens or legal claims on your property, bankruptcies, and past due child or spousal support.

Inquiries. Your credit report will show the names of all those who have requested your report for at least the past year. A history of your applications for loans or credit will be evident in this section as well.

 

Credit Scores

A credit score is a numerical guide that is representative of lending risk. It is determined by your past credit usage, and is used by lenders to evaluate your credit application. Only information from your credit report that can predict future credit performance is used to determine a score.

Scores generally range from 300 to 850, with higher numbers indicating a lower risk. A common model was developed by Fair, Isaac and Company. They issue a FICO score, which is based on many factors, including (in order of greatest weight) payment history, amounts owed, length of credit history, pursuit of new credit, and types of credit in use.

As your credit activity changes, so too does your score. Scores reflect payment patterns, with more emphasis placed on recent activity. By paying bills on time, keeping balances low (particularly in relation to the account limit), and only applying for and opening new accounts as needed, you can increase your score over time.

 

Improve Your Credit Report

Negative information, if accurate, cannot be removed from your credit report until it is time to drop off. You can, however, improve your credit report by taking action today.

Develop a debt repayment plan. If you have high consumer debt, develop a plan to repay it. Suspend charging or borrowing, reduce your interest rates, and pay as much as you can each month until the balances are at zero. For help in developing a realistic repayment schedule or budget, call BALANCE at 888-456-2227.

Pay collection accounts. Accounts that have been “charged off” (written off as bad debts by a creditor) and sold to a collection agency are harmful to a credit report, even if the amount owed is small. While you can’t change the past, you can improve the future by paying it and having it reflected as a satisfied debt.

Use credit wisely. The fastest way to build a positive credit history is to use credit responsibly. However, since it can be difficult to qualify for an unsecured credit card if you have a history of payment problems, consider:

  • A secured credit card. With a secured credit card, you put funds on “hold” with a lender, and they issue you a credit card with a credit line equal to your deposit. If you make timely payments for approximately one year, the creditor may release the security funds and issue you an unsecured card.

  • A co-signer. Another option is to have someone with a good credit history co-sign your loan or credit application. If you take this route, make good on the debt, since late payments will reflect poorly on both of your credit reports.

 

Credit Report Regulation

Credit bureaus are regulated by the Federal Trade Commission, and must comply with the Fair Credit Reporting Act (FCRA). This federal law guarantees you specific rights:

The right to access your reports. If you have been denied credit, a loan, insurance, or employment because of information on your credit report, the company that turned you down is required to inform you of that reason, and provide the name of the bureau they used. You are entitled to a free copy of that report (within 60 days).

You may also receive a free copy of your credit report from each of the three bureaus once a year (or anytime you suspect identity theft has occurred) from Annual Credit Report Request Service, or directly from the credit bureaus if you are unemployed, on public assistance, or if your report is inaccurate due to fraud. You may access it at any other time from the bureaus for a fee.


The right to accuracy.
It is the credit bureau’s responsibility to report only correct information. If you discover inaccuracies, file a dispute with the bureau (see “Fixing Errors,” below).

The right to explain yourself. In one hundred words or fewer, you can explain your side of a credit problem. This “100-word statement” won’t change your score, but it could make a positive difference to whoever is reading the report. Write the note clearly, include supportive facts, and send it to the bureaus to be attached to your report.

The right to have negative information “age-off.” While positive information can remain on a credit report indefinitely, most negative information will eventually “age off.” Reports may reflect lawsuits, judgments, liens, foreclosures, Chapter 13 bankruptcy (from date of filing), late payments or any other negative information for seven years from the time it was reported. For accounts in collection agencies, the period begins on the date the account was written off by the original creditor.

Chapter 7 bankruptcy remains on a credit report for ten years from the date of filing. Child support arrearage and default notations for student loans can be reported until satisfied.

The right to privacy. Only those with a need recognized by the FCRA may access your reports. This is usually a creditor, insurer, landlord or other business. Current and prospective employers must have written consent from you before accessing your report.

The right to seek damages. If you believe a credit bureau, a business that provides information to the bureau, or a user of the information contained in your report violates the FCRA, you can file a complaint with the Federal Trade Commission. You may also have additional rights concerning your credit information under state law.

 

Fixing Errors

Mistakes do happen. Some causes of inaccuracies include mistaken identity or, more seriously, fraud. Be sure to have incorrect or outdated information investigated and removed:

  • Step one. Either dispute the error on the credit bureau’s website, or send a letter to the bureau explaining which information is wrong and what the right information is. Enclose supporting documents. The bureau has 30 days to investigate, during which time a dispute notation will show up on your report.

  • Step two. The credit bureau must give you a written report of the investigation and a copy of your report if it results in any change. If an item is deleted or a dispute statement is filed, you may ask that anyone who has recently received your report be notified.

  • Step three. If the investigation results in no change though the information is truly inaccurate, contact the creditor directly and request documentation of the debt. If you dispute an item with a creditor, they may not report the information without including a notice of your dispute. Once you have notified the creditor of the error in writing, they may not continue to report the information if it is, in fact, incorrect.

 

Identity Theft

If someone has applied for and received credit using your personal information, immediately contact the fraud units of the three credit bureaus and have a fraud alert attached to your file. Add the 100-word statement to your report explaining that your information was used illegally and include a phone number where you can be reached to verify new credit applications.

When communicating with the credit bureaus, ask for the names and numbers of any creditors with whom fraudulent accounts have been opened – you will need to alert these businesses of the crime. Have the bureaus notify anyone who has received your reports within the past six months of the erroneous information. Request copies of your credit reports every three months to verify accuracy.

The Fair and Accurate Credit Transactions Act, a federal law was enacted to help in the fight against identity theft. As it applies to credit reports and credit bureaus, it ensures that:

  • Identity theft victims who file police reports can block fraudulent information from appearing on their credit reports.

  • Credit bureaus must ensure that all credit requests are legitimate after a credit report has been flagged for suspected identity theft.

  • Active duty military personnel may place special alerts on their files when they are deployed overseas.