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| About
Credit |
You are most likely already familiar with the concept
of "credit," the reputation for paying your
bills on time that makes it possible for you to obtain
money or goods with the understanding that you will pay
for them later.
In fact, you probably have already put your credit to
work for you. You employed it when you obtained an auto
or student loan, used your credit card to pay for a trip
or new suit, or were chosen as the tenant for your rented
apartment or house. A solid history of paying your bills
may also have been just the objective character reference
needed to help you land your job, too.
But even if you use your credit every day, you may have
questions about the credit industry and how it affects
you. In today's society, credit is much more complicated
than keeping a tally at the local grocery. As a credit-active
consumer, you need to know how credit reporting works
and what your credit report contains.
What Is a Credit Bureau?
A credit bureau or credit reporting agency is in the business
of gathering, maintaining, and selling information about
consumers' credit histories. It collects information about
consumers' payment habits from credit grantors like banks,
savings and loans, credit unions, finance companies, and
retailers. The credit bureau stores this information in
a computer database and sells it to credit grantors in
the form of credit reports. When you apply for a new credit
card or loan, the credit grantor orders your credit report
from at least one credit bureau and analyzes the information
to decide whether to grant you credit. The credit bureau
charges the credit grantor a fee for every credit report
sold.
Although credit reporting agencies provide your credit
report to lenders when you apply for credit, they do not
make actual lending decisions. It is up to individual
lenders to evaluate your credit report and any other factors
they consider important and then decide whether or not
to offer you credit.
The Three Consumer Credit Bureaus
There are three major credit bureaus providing nationwide
coverage of consumer credit information in the United
States: Experian, Equifax, and TransUnion. Although many
national lending institutions report consumer credit information
to all three, smaller banks and other credit grantors
may report to only one--or even none. Therefore, your
credit report from one credit bureau is not necessarily
exactly the same as your credit report from another.
What Exactly Is a Credit Report?
A consumer credit report is a document that contains a
factual record of an individual's credit payment history.
Credit grantors are permitted by law to review your credit
report to objectively determine whether to grant you credit.
There are 190 million credit active people in the United
States who have a charge account, car loan, student loan,
or home mortgage. As those people pay their bills, most
lenders report credit payment information to credit bureaus.
So most of the information in your consumer credit report
comes directly from the companies you do business with.
What Information Does a Credit
Report Contain?
A consumer credit report contains four types of information:
identifying information, credit information, public record
information, and inquiries.
Identifying information
includes:
- Your
name
- Your
current and previous addresses
- Your
Social Security number
- Your
year of birth
- Your
current and previous employers
- If
you're married, your spouse's name
Credit
information includes credit accounts or loans
you have with:
- Banks
- Retailers
- Credit
card issuers
- Other
lenders
Public
record information includes any information
that's contained in state and county court records, like:
- Bankruptcies
- Tax
liens
- Monetary
judgments
Inquiries
indicate to other credit grantors that you have applied
for new credit that could result in additional debt. Potential
lenders view multiple recent inquiries on your credit
report as a sign that you are overextending yourself.
(A credit risk score
may also be included when your report is provided to a
credit grantor, although it is not included on consumer
review reports. The ways to calculate and use a credit
score vary widely, so a score has little meaning outside
of the context of a particular lender's unique guidelines
for use. Therefore, it is not included on consumer review
reports.)
What is a Credit Risk Score?
A credit risk score is a statistical summary of the information
contained in a consumer's credit report. Sophisticated
mathematical processes calculate the score by assigning
numerical values to various pieces of information in the
credit report. Credit bureaus provide risk scores to credit
grantors who use them to objectively evaluate an applicant's
credit-worthiness. The score itself is relative and will
be viewed differently by creditors depending on numerous
factors, including the creditor's risk level, marketing
goals, and business practices. Your risk score will change
over time as your credit history develops.
Does a Credit Report Contain
Other, Unrelated Personal Information?
No. Your consumer credit report does not contain information
about your race, religious preference, medical history,
personal lifestyle, personal background, political preference
or criminal record.
How long Does Information Stay
on My Credit Report?
Positive credit information remains on your report indefinitely,
although information about an account will cycle off your
report if no new information is reported about it for
seven years. (Thus, a closed account will disappear from
your report seven years after it is reported closed by
the credit grantor.)
Most negative information remains for up to 7 years. Bankruptcies
can remain on your credit report for up to 10 years. Other
public record information can remain for up to 7 years.
Most inquiries stay on your credit report for up to two
years.
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