Your Credit Report
What It Says About You
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Most people finance their homes with mortgages and
pay for their cars 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 you
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.
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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 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 for the 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:
- 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.
- 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, or installment
loan; 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 past two years).
- Public Record Information: State and county
court records on bankruptcy, tax liens, or monetary judgments
(some consumer reporting agencies list non-monetary judgments
as well).
- Recent Inquiries: The names of those who have
obtained copies of your credit report within the past year
(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 department store
that issued you a credit 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 your 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 not part of a conspiracy against you. They are simply
the result of human error.
How Do Errors in Reports 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 more
information about you. Cases of mistaken identity, out-of-date
information, and outright errors can easily occur.
How Do You Correct an Error on Your
Credit Report?
Contact the consumer credit reporting agency immediately.
The company is then responsible for researching and changing
or removing 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 six 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 of it),
unless the credit bureau decides that it is irrelevant or
frivolous.
What Should You Do if You Are Denied
Credit because of Something in Your Credit Report?
The lender who denied you credit must give you the name
and address of the credit bureau that produced the credit
report. Then, you have up to 30 days to request a free copy
of your report.
The credit bureau must tell you the nature and substance
of all information contained in your report. It must also
tell you the sources of the information and who has received
your report for the previous six months (two years for reports
furnished for employment purposes).
Late and missed payments will show up on your credit report
and hurt your chances 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. Additional information on improving a credit rating
can be found in "How to Establish, Use, and Protect Your
Credit," a brochure by the Federal Reserve Bank of San Francisco.
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. If you file
for personal bankruptcy, that fact remains on your credit
report for 10 years.
How Do You Get a Copy of Your Credit
Report?
You are entitled to receive one free credit report every
12 months from each of the nationwide consumer credit reporting
companies—Equifax, Experian and TransUnion. This
free credit file can be requested through www.annualcreditreport.com or by contacting the companies directly by phone or by mail
as listed below.
To process your request, you will need to provide specific
information, such as your name, current and previous addresses,
telephone number, social security number, and date of birth.
Also, to verify your identity, other information such as
a copy of your driver's license, utility bill(s), or bank
statement may be required. 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.
To contact the three major credit bureaus:
For More Information
The Federal Reserve Bank of San Francisco has several
other consumer brochures. These brochures are posted
on our web site at: http://www.frbsf.org/publications/consumer.
Learn about . . .
Questions or comments about these brochures can
be sent to:
Federal Reserve Bank of San Francisco
Public Information/Publications
P.O. Box 7702, MS 1110
San Francisco, CA 94120-7702
(415) 974-2163 or
e-mail us at: Pubs
SF
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Questions and concerns about consumer reporting
agencies can be directed to:
Federal Trade Commission
Consumer Response Center - FCRA
600 Pennsylvania Avenue, NW
Washington, D.C. 20580
http://www.ftc.gov
(877) FTC-HELP
For information on organizations that help with
credit counseling, contact:
National Foundation for Consumer Credit
8611 Second Avenue
Silver Spring, MD 20910
http://www.nfcc.org
(800) 388-2227
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This overview was based on
materials originally created by the Federal Reserve Bank
of Philadelphia.
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