A consumer credit report is a factual record of an individual's credit payment history. It is provided for a purpose permitted by law, primarily to credit grantors. Its main purpose is to help a lender quickly and objectively decide whether to grant you credit. Examples of credit include car loans, credit cards and home mortgages.
Your name, current and previous addresses, phone numbers, Social Security Number, date of birth, and current and previous employers. This information comes from your credit applications, so its accuracy depends on your filling out the forms clearly, completely, and consistently each time you apply for credit.
Specific information about each account such as the date opened, credit limit or loan amount, balance, monthly payment, and payment pattern during the past several years. This information comes from companies that do business with you.
Federal district bankruptcy records, state and county court record of tax liens and monetary judgments, and, in some states, overdue child support. This information comes from public records.
The names of those who have obtained a copy of your credit report. This information comes from the credit reporting agency.
Credit reports do not contain data about race, religious preferences, medical history, income, personal lifestyles, political preferences, friends, criminal record, or any other information unrelated to credit.
Credit reports may also include a credit score that lenders may use to make loan decisions and assign rates. We'll discuss credit scores a little later.
Every credit report is custom made. When a credit grantor requests a credit report on a specific consumer, the credit-reporting agency collects information about the consumer from various portions of its computerized database.
For example, when John Q. Consumer goes to DCU for a car loan, the loan officer may request a credit report by giving the credit reporting agency specific information from John's credit application; full name, full address, Social Security number, and date of birth.
The credit reporting agency uses information to search its database for all relevant data reported about John, credit and identification information from lenders, public record data from the court systems, and the credit agency's own records of who has received a recent copy of John's credit report.
In a very short period of time, the credit-reporting agency compiles the information into a single report and transmits the report back to DCU. At that point, the credit reporting agency's job is done.
Credit reporting agencies provide data to credit grantors at their request. The role of the lender is to make lending decisions. In making their lending decisions, credit grantors often look at factors such as how long you've lived at the same address, the amount of your unused credit, and your past credit history.
Different lenders may use different pieces of information to make their decisions or make different decisions based on exactly the same information. In fact, the same lender may change its decision criteria over time. Only the individual lender knows the reasons for granting or denying credit. However, there are laws that protect consumers from discriminatory lending practices.
Federal law specifies how long negative information may remain on your credit report.
To prevent past errors from haunting you forever, most negative information must be erased after seven years. This includes late payments, accounts that the credit grantor turned over to a collection agency and judgments filed against you in court even if you later pay the account in full. The length of time a bankruptcy remains on your credit report depends upon which type you file.
Chapter 7 (10 years) A liquidation where assets (if any) are sold to settle debt to creditors.
Chapter 11 (10 years) A reorganization (typically for corporations and partnerships) to address the repayment needed.
Chapter 12 (7 years) A simplified reorganization for farmers where the debtor retains their property and repays debt from future profits.
Chapter 13 (7 years) A repayment plan for individuals with regular income and debt under a certain amount.
Credit reporting agencies use the date of original delinquency or, in the case of public records, the date of filing to determine when negative information is deleted. Positive information remains on your credit report indefinitely.
Yes, poor credit records will greatly lessen your chances of obtaining a mortgage. According to a recent survey by Fannie Mae, a government-chartered company that provides lenders funds to make mortgages, most American's don't understand the link between their credit records and their chance of obtaining a home mortgage. Just 41% of Americans say that being more than 90 days late paying utility bills three times or more in recent years would be a major problem for obtaining a home mortgage. Thirty-two percent say it would only be a minor problem, and 18% say it wouldn't be a problem at all. The truth is that any late payments reported to credit bureaus harm your ability to obtain loans at favorable rates if at all.
No one can legally remove accurate information from a credit report. Only time can erase bad credit.
Before the advent of national credit reporting agencies, consumers could obtain credit only in communities in which they were known and had lived for years. If they moved to another town where they were unknown, credit was virtually unobtainable.
Now, automated credit reporting systems enable a consumer's good credit reputation to make credit possible no matter where that consumer decides to live.
Because of automated credit reporting agencies, Americans enjoy the widest access to credit at the lowest interest rates in the world. Credit information enables lenders to either avoid consumers who don't pay their bills or to lend to them on special terms. Credit losses, which ultimately get passed on to consumers who do pay their bills, are therefore minimized.
Credit reporting agencies also foster intense marketing battles among financial services providers. This competition brings you reduced annual fees, special toll-free customer service phone numbers, customer recognition and incentive programs, and purchase protection plans.
Enacted by the U.S. Congress in 1970 and amended in 1996, the Fair Credit Reporting Act (FCRA) protects your rights as a credit-active consumer by limiting access to your credit report. You may request a copy, but no one else may legally review your report without permissible purpose, like:
in connection with your application for a government license
to manage the risk of potential or current credit, investment or insurance accounts
for employment purposes such as hiring or promotion
in response to a court order or federal grand jury subpoena
in accordance with your written instructions
in connection with an FBI investigation of issues such as counterintelligence
Anyone who knowingly and willfully obtains a credit report under false pretenses may be fined and imprisoned. The FCRA also includes these consumer protections:
To prevent past troubles from haunting you forever, most negative information must be erased after seven years. Bankruptcies remain no more than 10 years. Credit reporting agencies use the date of original delinquency or, in the case of public records, the date of filing to determine when negative information is deleted.
You may obtain a free copy of your credit report if you ask for it within 60 days of being denied credit, insurance, employment or rental housing based on information in the report. Or, you may get a copy if you suffer an "adverse action" such as decreases in your credit limit or increased interest rate.
When credit is denied based on information in a credit report, the credit grantor must tell you the name and address of the credit bureau that supplied the report and, upon written request, the reason for the denial.
If you dispute the accuracy of information in your credit report, the credit-reporting agency must investigate within 30 days.
Your report must reveal who has received a copy within the past two years for employment purposes or within the past year for any other purpose.