Credit Bureaus or Consumer Reporting agencies are companies that gather information about your payment history on your obligations.
These credit bureaus are in the business of gathering this information and then SELLING it to future creditors, employers, insurers and any others who have a legal reason for requesting your information.
It is important to understand how credit reports and credit scores work.
Three Major Credit Bureaus:
Equifax, Experian and TransUnion are the three major reporting agencies.
They gather information from one source and give it to another. They do not determine what information that is or what it should be.
Sometimes there is confusion on what information they can and cannot report.
What Goes Into Your Credit File
PERSONAL INFORMATION
The personal information that goes into your report will be your full name, aliases or nicknames, current and previous addresses, your telephone number, your Social Security number and any variations of that number used.
Your date of birth is included and previous and current employers.
No information on health or medical treatments, race gender, ethnicity, political or religious preference should be reported.
Credit Information / What is Reported
Sometimes referred to as ‘Tradelines’
This will show your individual accounts that you have opened or has had activity within seven years. The creditor’s account number, current status and whether your account has been delinquent.
Delinquency is reported in 30 day intervals.
Charge Off means that the payments have been delinquent by 180 days for an open end retail account (credit card:charge or unsecured) or 120 days for a closed end retail account (personal car or equity loan).
A charge off means you still owe money and the company will try to collect it, but the account is no longer part of their active accounts receivable. This most likely has a negative affect on your credit rating.
Other information reported will include the account opening date, the type of account, the credit limit and if it is a joint account or in your name only.
Public Records / Consumer Statements / Inquiries
PUBLIC RECORDS:
The public records section does not show good news. This section includes tax liens, judgments, overdue court ordered child support and bankruptcy.
CONSUMER STATEMENTS:
Consumers are allowed to place up to a 100 word statement on their credit file. This is most used when a consumer disputes information contain in their credit file. If the creditor and the credit reporting agency does not agree with the consumer and do not remove the negative information, the consumer has the option of placing a statement in their file disagreeing with their findings.
** Be careful when using this option. Do not mistakenly put personal information that every creditor will have access to. Writing a letter may be a better option when applying for a loan.
INQUIRIES:
Inquiries are requests by others to review your credit report. There are two types: inquiries inquiries initiated by you and those for other purposes..such as pre-approved credit offers, employment or account review.
How Long Information Is Reported
Bankruptcy – Chapter 7:10 years from filing
Civil Judgments:7 years from filing
Tax Liens:15 years for unpaid / 7 years from date paid
Credit Information (Tradelines):7 years from date of last activity
Consumer Statements:2 years minimum
Inquiries:1 year for credit transactions, 2 years for employment
Credit Scores
There is NO single credit score formula. A credit score is the process of assigning a number value in order to rate your level of credit risk.
How The FICO Score Became About:
Bill Fair and Earl Isaac thought they could come up with people’s credit risk by guessing how likely they would repay a new loan on time. Banks laughed at them at first, but started to have success with their product and the rest is history.
The credit bureaus now have rented space on the computer of Fair Isaac and can produce a credit score upon request. Funny thing is, the banks do not even know what goes into creating a credit score. This is considered a trade secret.
Fair Issac has created separate products for each credit bureau or financial institution and uses a unique formula, so you could end up with different scores from each credit bureau.
Do not obsess about a number, especially since now you know there really is not a correct one. Instead, focus on the information contained in your report.
Free Credit Reports
It is important to Monitor Your Report
You need to know what is being reported and whether that information is correct. Under the Fair and Accurate Credit Transactions Act, you are entitled to receive a free report each year from the three major credit reporting agencies.
This will also help stop identity theft which is the fastest growing crime and fraud,victimizing over 10 million people a year and costing billions of dollars.
Did you know that stolen identities are used up to 30 times, with most victims only discovering the theft after they have been turned down for a loan or contacted by a collection agency. You may already be a victim, many times over, and not even know it
You need to take steps to protect your information and an annual review of your credit report file is a good habit to get into.
|
