Credit Report Companies
Whenever you apply for credit (a mortgage, car loan, credit card, store card etc.) the company to whom you are applying will carry out a background check to establish your credit worthiness and thus the risk to them in extending a line a credit to you.
Exactly how this is done will vary from one country to the next, although the system is similar in almost every country, and within the United States there are three major credit bureaus - Equifax credit reporting agency (Atlanta, GA), Experian credit reporting agency (Allen, TX) and TransUnion credit reporting agency (Chester, PA). Each consumer credit reporting agency maintains a personal credit record file for you which provides an historic record of your borrowing and shows how well you have managed your credit agreements.
Thousands of lenders up and down the country including banks, finance companies, credit card companies, credit card issuers, credit unions, retailers and others send information to the three main credit reporting agencies each month and this information is then used to update personal credit reports.
What is a credit report?
The format of a credit report will vary from one credit bureau to the next but each report will contain information which can be divided into four main areas.
- Personal (Identification) Information.
Your report will contain such information as your name, address, date of birth, social security number, employment details and your current address.
- Lines of Credit.
Your report will then show details of any credit which you have been granted showing the type of credit (e.g. mortgage loan, bank loan, car loan, credit card account etc.), the company extending this credit facility, the date on which the account was opened, the amount of any loan or credit limit and the balance on the account. This section of your credit report will also show details of your payment history.
- Credit Inquiries.
Whenever you apply for credit the lender will ask one or more of the credit bureaus for a copy of your credit report and this request will be recorded on your credit report and will normally remain on the report for a period of two years. Inquiries are also divided into 'voluntary' inquiries which are those inquiries made in response to your own request for a line of credit and 'involuntary' inquiries which are those made by lenders who wish to make you an offer of pre-approved credit. For more information please see our article on credit inquiries.
- Details From The Public Record And Items Which Are The Subject Of Collection.
This section of your credit report will contain information obtained from the state and county courts in respect of such things as bankruptcies, law suits, wage attachments and foreclosures, as well as information gained from collection agencies on overdue debt.
Your Rights In Respect Of Your Credit Report
The credit reporting bureaus not only maintain credit reports but also sell those reports to accredited lenders to whom you have applied for credit and so it is extremely important that the information contained in your credit record is accurate. To ensure that this is the case the Fair Credit Reporting Act (FCRA) provides you with the following rights in respect of your credit report:
- You have the right to receive a copy of your credit report on request which must contain all of the information held in your credit report file on the date on which your request is made. Indeed once each year you are entitled to receive a completely free credit report and our article How to get a free copy of my credit report will tell you how to obtain this.
- You have the right to request the name of any person who has requested a copy of your credit report within the past year, or the past two years if the request has been made for employment purposes.
- If a company denies you credit on the basis of a credit report you have the right to know the name and address of the credit bureau which supplied the report on which this decision was based.
- If a company denies you credit on the basis of a credit report you have the right to request a free copy of your credit report from the bureau which supplied the report on which the decision to deny credit was made provided that you request the report within 60 days of receiving notice of the denial of credit.
- If you believe that your report is either inaccurate or incomplete you have the right to file a dispute with the credit bureau concerned and the company which supplied the disputed information to the credit bureau. Both are then legally obliged to investigate the matter.
- If, having entered into a dispute, you are not satisfied with the outcome you have the right to add your own comments to your credit report in the form of a summary explanation.
Missing Items From Your Credit Report
Although the majority of lenders forward information to the three credit report bureaus the requirement to furnish such information is purely voluntary and many smaller lenders do not forward account information. In particular, many local retailers, credit unions, student loan, entertainment, travel and gasoline card companies do not not participate in reporting.
This most often comes to light when you request a loan early on in your 'credit career' and find that you are denied credit because you have 'no credit file' or 'insufficient credit history'. If you are trying to build up a credit history therefore, with a view to obtaining credit at a later date, it is a good idea to ensure that anybody who is currently extending you credit reports the fact to the credit bureaus. Where this is not the case you might even consider switching your account to a lender who does furnish information to the credit bureaus.
How Long Does Negative Information Remain On Your Credit Report?
The length of time that negative information will remain on your credit report varies according to the type of information in question. However, as a general rule information will be held as follows:
- Bankruptcies - 7 years in the case of completed Chapter 13 bankruptcies and 10 years for Chapter 7 bankruptcies.
- Foreclosures - 7 years.
- Late payments - 7 years.
- Collections - In general debt collections will remain on your credit report for 7 years but this does to a certain extent depend upon the age of the debt being collected.
- Public Record Items - Public record items will remain on your credit report for 7 years (other than bankruptcies as cited above) with the exception of unpaid tax liens which can remain indefinitely.
One point to bear in mind is that, although negative information may remain on your credit report for a considerable period of time, the importance given to that information when it comes to deciding whether or not to grant you credit declines over time. For example, information concerning a collection 6 years ago will have far less of an impact on any decision than a collection recorded just 6 months ago.
Most lending decision are, in large part, made on the basis of your credit score which is calculated from the information contained in your report. For further information on credit scores please refer to our article on understanding your credit report score.
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