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CREDIT REPORTS
OUR ECONOMY IS BASED ON
CREDIT.
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, countless people routinely make
purchases with credit cards.
We can’t expect to receive credit as a matter of course,
however. We must apply for it. And just as you would be hesitant
to lend money to a stranger, no bank, retailer, or finance
company will 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 you credit. Today, they rely on credit reports,
so it’s important for you to know what’s in yours.
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?
In most cases, from credit bureaus (also called credit-reporting
companies), which collect information about our credit
activities and store it in giant databases. The credit bureaus
that charge a fee for supplying the information. Today, there
are three major credit bureaus that operate nation-wide, plus
many smaller companies serving local markets.
Who is allowed to see my credit repot?
Credit bureaus can provide information only to the following
requestors:
- Creditors who are considering granting or have granted you
credit
- Employers considering you for employment, promotion,
reassignment, or retention
- Insurers considering you for an insurance policy or
reviewing an existing policy
- Government agencies reviewing your financial status in
connection with issuing you certain licenses or government
benefits
- Anyone else with a legitimate business reason for needing
the information (such as a potential landlord). Credit bureaus
also furnish reports if so required by court orders or federal
jury subpoenas and they also issue your report to a third
party if you give them written instructions to do so.
What type of information is on my credit report?
There are usually four types of information:
- Identifying Information: your name (including if you’re a
Sr., Jr. or a III), nicknames, current and previous addresses,
social security number, year of birth, current and previous
employers, and, if applicable, your spouse’ s name.
- Credit Information; the accounts you have with banks,
retailers, credit-card issuers, and other lenders. The
accounts are listed by type of loan (mortgage, student loan,
revolving credit), 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 Recording Information; state and county court
records on bankruptcy, tax liens, or monetary judgments. (some
credit-reporting companies list non-monetary judgments as
well.)
- Inquiries: the names of those who have obtained copies of
your credit report within the last six months (two years for
employment purposes).
Where do the credit-reporting companies get their
information?
From parties that have previously extended credit to you, such
as the department store that issued you a credit card or the
bank that issued you a personal loan.
Do the credit-reporting companies make the decision whether
to grant me the loan?
No. The credit-reporting companies only supply the information
about your credit history. It is the lenders themselves who make
the decision whether to grant you credit.
Why should I obtain a copy of my credit report?
To avoid any unwelcome surprises. It’s especially important to
see a copy of your credit report before you apply for, say, a
car loan, a mortgage, or a credit card. Errors in credit reports
are not uncommon. Keep in mind, however, that they are not part
of a conspiracy against you; they’re simply the result of human
error.
How do errors in reports happen?
Think about how often a misspelling of your name or mistake in
your street address shows up on a piece of your mail. Then
imagine the possibility for error in a report that contains many
more points of information about you. Cases of mistaken
identity, out-of-date information, and outright inaccuracies can
easily occur.
What I do if I find an error on my credit report?
Notify the credit-reporting company immediately. If the company
cannot confirm the information under dispute, it will be removed
from your file and a corrected report will be sent to those
parties you specify who have received your report within the
past six months (or within two years if the party requested your
report for employment purposes)
What if the credit-reporting company stands by its report?
You have the right to present your side of the story in a brief
statement, which the credit bureau must attach to your credit
file. Anyone requesting a copy of your credit report would also
automatically receive your statement (or a summary or
codification of it) unless the credit bureau deems it irrelevant
or frivolous.
What should I do if I am denied credit because of something
in my credit report?
The lender denying you credit must give you the name and address
of the credit bureau that provided the credit report. At that
point, you have up to 30 days to request a free disclosure. Most
consumer-reporting agencies provide consumers with copies of
their reports. A few may make disclosure only in person or by
telephone. The credit bureau is obligated to let you know the
nature and substance of all information contained in your
report. It must also tell you the sources of the information and
the recipients of consumer reports for the previous six months
(two years for reports furnished for employment purposes).
How long does information stay on my credit report?
Generally the credit bureau must automatically delete
information on adverse credit instances that are more than seven
years old and any bankruptcies that are more than 10 years old.
However, these rules do not apply to information provided for
credit transactions involving a principal amount of $50,000 or
more, underwriting of the insurance involving a principal amount
of $50,000 or more, or employment of an individual at an annual
salary of $20,000 or more.
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