Credit Reports-creditors
Let's learn on the basics of the credit reporting system. From the big three credit bureaus, TransUnion, Equifax and Experian, to your rights under the Fair Credit Reporting Act, this class will help you pilot the credit report maze.
The Credit Reporting Agencies – TransUnion, Equifax and Experian (formerly TRW) are the three national credit reporting agencies that keep records on almost every American with credit history. The reporting agencies work with lenders, credit grantors, insurers and employers to update and distribute your credit information to the appropriate institutions. Here's an example of how the system works:
- When you apply for a new credit card the credit grantor wishes a copy of your financial history from the reporting agencies. This causes a “hard inquiry” to be recorded on your credit report.
- The credit issuer uses your credit report and credit scores along with income and debt information to determine what rates to offer.
- As soon as you start using the new credit card the creditor reports your activities to the credit reporting agencies every 30 days.
- The credit reporting agencies update your credit report on a regular basis as they receive new information from creditors or lenders
- Your credit profile changes based on your financial activity. The next time you apply for a credit card or loan, the process repeats
Your Credit Report – Your credit report is divided into six main sections: consumer information, which is address, birthday and employment, consumer statement, account histories, public records, inquiries and creditor contacts. Based on your actions, such as opening a new account, missing a payment or move, these sections are updated with new information. The old records will stay on your credit report for about 7 years, with the exception of bankruptcy. Not all creditors report to all three agencies and the agencies don't share their data so your reports from TransUnion, Equifax and Experian could be substantially different from each other. That's why it's important to check your three credit reports every few months or at least once a year to ensure that the information is accurate and up-to-date.
Correcting Inaccuracies – The Fair Credit Reporting Act protects the consumers from having inaccurate information on their credit reports. Contact your creditor or lender associated with the mark if you find an inaccurate record on your report. These companies can usually correct the mistake and send an update to the credit reporting agencies. If you can't make progress this way, you can also dispute the inaccuracy directly with the credit reporting agencies.
Working the System – Keeping your credit reports in good shape will improve your credit scores and help get you the best rates on major purchases. We recommend that you check your credit reports every 3-6 months or even once a year in order to guard against damaging inaccuracies and identity theft. Usual check-ups along with paying your bills on time, keeping your credit card balances below 50% of their limits and correcting any negative inaccuracies will help you maintain a healthy credit profile.
