What is a credit report?
A credit report is a collection of facts and fallacies about your financial life. It includes all information about your credit transactions that were reported to the credit reporting agency. No checking on the validity of this information is performed by the credit reporting agency. The agency takes it on blind faith that the information provided by a creditor is 100% accurate no matter what it says. And, it is inserted into your credit report as received. This is often the cause of credit report mistakes because this information is entered into your credit report just as it is reported to them without being verified. Another major area of error is within the credit reporting agencies themselves, The information is entered by people and it is somewhat common for mistakes to be made while a clerk is entering data about you. It is also fairly common to find credit information that is not yours on your credit report. This can happen by a data entry error, a computer matching problem, or by the actions of someone trying to commit fraud.
Data Collection Procedures
How is credit information collected? Credit information is collected by the credit reporting agencies in a variety of ways, both automated (via computer) and manually, Information that is collected in an automated way is never viewed by the credit reporting agency. It goes directly from the creditors computer to the credit reporting agencies computer. Information entered manually is physically entered into the credit reporting agencies computer by one of their employees. This information also originates at a creditor but for various reasons cannot be entered in an automated manner. All information in a credit report is compiled from information sent to the credit reporting agencies by creditors. Credit reporting agencies do not actively collect information about you. It is supplied to them by creditors like Visa, Master Card, and your bank.
Because of the passive role of credit reporting agencies, it is fairly common to find information about a loan or other type of credit not even reported on your credit report. All it means is that the creditor did not take the time to report a credit transaction to a credit reporting agency. If good credit information is missing from your credit report, you can get it included in your credit report. It is a valuable statement about your creditworthiness. A form letter, letter #1 I – Reporting Accounts Not Appearing in Your Credit Report; is provided in Appendix III to help you do this.
Uses Of Credit Reports
How is this credit report information used? Every time you fill out a loan application form for a house, car, credit cud, furniture loan, etc., the potential creditor runs a credit check on you at one or mom credit reporting agencies. The potential creditor then uses this credit report information as part of its scoring process. These scores m based on the types of credit and their status (good or bad) in this credit report.
Assuming that there are no negative marks that we totally unacceptable to the creditor, the points from your credit report and other items on your application are added together. If the score is high enough, the credit is granted. If it is too low, credit is denied. Getting a loan really is that mechanical.
I guarantee that if there are enough negative marks or just one or two that me major negative marks like a foreclosure, you will almost definitely be denied credit from that potential creditor and you will not get that car, house, or whatever you were trying to purchase.
Obtaining Your Credit Report
If you need to contact one of the Big Three agencies directly, here is contact information for each of them.
- Experian (formerly TRW) http://www.experian.com National Consumer Assistance Center PO Box 2106 Allen, TX 75013-2106 (800) 682-7654
- Equifax Credit Information Services, Inc. http://www.equifax.com PO Box 740241 Atlanta, GA 30374-0241 (800) 685-1111
- Trans Union Corporation http://www.tuc.com Trans Union Consumer Relations 760 West Sproul Road, PO Box 390 Springfield, PA 19064-0390
Each credit reporting agency is dominant in certain areas of the country. This means that more credit information will be reported to the agency that is dominant in the region where you live than to my other agency. Many local credit ends and installment loans will appear in this agencies files while not appearing in the other credit reporting agencies files. For example, if TRW is dominant in your region, it will show the loan from the local furniture store but your credit report from TransUnion might not show it because it generally does not carry local credit information from its non-dominant region of the country. This is simply because a local creditor often does not want the expense of being a subscriber to multiple credit reporting agencies. So it only subscribes to the dominant credit reporting agency in its region.
However, large items like cars and houses and of course negative credit items generally are reported to all three agencies. Due to this disparity in reporting, lenders of big-ticket items will almost always get credit reports from more than one credit reporting agency when determining your creditworthiness.
The law on getting credit reports constantly changes. The best way to get your credit report is to write to the agency at the address above. The agency will then send you a form to fill out and tell you if any fee is charged for this service. Some agencies provide one free report per year and charge for additional reports. Others charge every time you request a credit report. This charge is in the neighborhood of ten dollars.
However, if you were recently denied credit, you are guaranteed a free credit report. In this case, your creditor will send you a letter telling you how to get a free credit report. Take advantage of this. It is your legal right. And it will probably save you wound ten dollars. However you make your request, you will be receiving your credit report within 30 days. It will be a computerized accounting of many of your credit activities for the past seven to 10 yews. They will also send you a little booklet telling you how to read your credit report. Unfortunately, credit reports generally contain a bunch of cryptic codes. These codes need a bit of deciphering to be easily understood. The rest of this chapter discusses how to decipher your credit report into plain English.
How To Read Credit Reports
Credit reports contain a tremendous amount of information, any item of which may be incorrect. At first glance, these reports seem overwhelming. By carefully wading the report and following the instructions that come with it, you will quickly learn how to interpret the information and identify the incorrect information. And if you get stuck at any point, make use of the toll-free number listed above to call the credit reporting agency and ask my questions you need to ask to decipher the information on your credit report.,
Verify all information on each item for accuracy. This includes account number, name of creditor, date account was opened, balance, and credit rating as well as any other information that may appear.
This is going to be a lengthy process, especially translating all the codes. Don’t get frustrated. Just do one entry at a time and follow the instructions that come with your report on how to read it. All abbreviations and the meaning of each field on the credit report is fully described in these instructions. Reading all the instructions before decoding your credit report is a worthwhile task. Please note that each agency uses a different format for reporting information so it is imperative that you read the instructions provided by each company before decoding that companies report.
Important items to look for are bankruptcy, judgment, tax liens, suits, wage assignments, charge-offs, inquiries, checkpoints, past-due accounts, and foreclosures to name a few. Items of this type are red flags to potential creditors. They do not like seeing these types of items on your credit report. It is these types of items we will concentrate on removing.
Appendix 2 lists all the different types of negative items that may appear on your credit report. It also includes a suggested dispute statement to use when contesting each negative item. Appendix V gives a plain English description of all the different fields that are currently used on all three of the credit reporting agencies reports.