Credit Report
Your credit payment history is recorded in a file or report. These files or reports
are maintained and sold by "consumer reporting agencies" (CRAs). One type of CRA
is commonly known as a credit bureau. You have a credit record on file at a credit
bureau if you have ever applied for a credit or charge account, a personal loan,
insurance, or a job. Your credit record contains information about your income,
debts, and credit payment history. It also indicates whether you have been sued,
arrested, or have filed for bankruptcy.
You have a right to know what's in your credit report. The CRA must tell
you everything in your report, including medical information, and in most cases,
the sources of the information. The CRA also must give you a list of everyone who
has requested your report within the past year-two years for employment related
requests.
Credit bureaus collect and sell four basic types of information:
Identification and employment information Your name, birth date, Social Security
number, employer, and spouse's name are routinely noted. The CRA also may provide
information about your employment history, home ownership, income, and previous
address, if a creditor requests this type of information.
Payment history Your accounts with different creditors are listed, showing
how much credit has been extended and whether you've paid on time. Related events,
such as referral of an overdue account to a collection agency, may also be noted.
Inquiries CRAs must maintain a record of all creditors who have asked for
your credit history within the past year, and a record of those persons or businesses
requesting your credit history for employment purposes for the past two years.
Public record information Events that are a matter of public record, such
as bankruptcies, foreclosures, or tax liens, may appear in your report.
Credit Scoring
Credit scoring is a system creditors use to help determine whether to give you credit.
Information about you and your credit experiences, such as your bill-paying history,
the number and type of accounts you have, late payments, collection actions, outstanding
debt, and the age of your accounts, is collected from your credit application and
your credit report. Using a statistical program, creditors compare this information
to the credit performance of consumers with similar profiles. A credit scoring system
awards points for each factor that helps predict who is most likely to repay a debt.
A total number of points -- a credit score -- helps predict how creditworthy you
are, that is, how likely it is that you will repay a loan and make the payments
when due.
To get copies of your report, contact the three major credit reporting agencies:
Equifax: (800) 685-1111
Experian (formerly TRW): (888) EXPERIAN (397-3742)
Trans Union: (800) 916-8800
These agencies may charge you a fee for your credit report.
How to improve my score
Credit scoring models are complex and often vary among creditors and for different
types of credit. If one factor changes, your score may change -- but improvement
generally depends on how that factor relates to other factors considered by the
model. Only the creditor can explain what might improve your score under the particular
model used to evaluate your credit application.
Scoring models generally evaluate the following types of information in your credit
report:
• Payment history typically is a significant factor. It is likely that your
score will be affected negatively if you have paid bills late, had an account referred
to collections, or declared bankruptcy, if that history is reflected on your credit
report.
• The amount of debt you have compared to your credit limits. If the amount
you owe is close to your credit limit, that is likely to have a negative effect
on your score.
• The length of your credit track record. An insufficient credit history may
have an effect on your score, but that can be offset by other factors, such as timely
payments and low balances.
• Many scoring models consider whether you have applied for credit recently
by looking at "inquiries" on your credit report when you apply for credit. Applying
for too many new accounts may negatively affect your score. Not all inquiries are
counted. Inquiries by creditors who are monitoring your account or looking at credit
reports to make "prescreened" credit offers are not counted.
• Too many credit card accounts may have a negative effect on your score. In
addition, many models consider the type of credit accounts you have. For example,
under some scoring models, loans from finance companies may negatively affect your
credit score.
Scoring models may be based on more than just information in your credit report.
For example, the model may consider information from your credit application as
well: your job or occupation, length of employment, or whether you own a home.
To improve your credit score under most models, concentrate on paying your bills
on time, paying down outstanding balances, and not taking on new debt.
Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) is designed to help ensure that CRAs furnish
correct and complete information to businesses to use when evaluating your application.
Your rights under the Fair Credit Reporting Act:
• You have the right to receive a copy of your credit report. The copy of your report
must contain all of the information in your file at the time of your request.
• You have the right to know the name of anyone who received your credit report in
the last year for most purposes or in the last two years for employment purposes.
• Any company that denies your application must supply the name and address of the
CRA they contacted, provided the denial was based on information given by the CRA.
• You have the right to a free copy of your credit report when your application is
denied because of information supplied by the CRA. Your request must be made within
60 days of receiving your denial notice.
• If you contest the completeness or accuracy of information in your report, you should
file a dispute with the CRA and with the company that furnished the information
to the CRA. Both the CRA and the furnisher of information are legally obligated
to reinvestigate your dispute.
• You have a right to add a summary explanation to your credit report if your dispute
is not resolved to your satisfaction.