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Credit Bureaus
Maybe you are looking into a mortgage or taking out a car loan. It may be as simple as filling out an application for a department store credit card but you run into this issue of your “credit rating”. Who decides your credit rating? Who tells the bank or dealership or merchant that you are or aren’t a good credit risk?
Credit bureaus, that’s who. In the United States there are three major credit bureaus: Experian, Equifax and Transunion. They aren’t run by the government, they are private, for-profit businesses that collect financial information on you and use that information to give you a credit score. The creditor (bank, lender, store etc.) then decides whether to extend you the line of credit based on this score and at what interest rate.
How do they get their financial information on you? Pretty much anyone who has a financial relationship with you can provide credit information (not personal information) with the credit bureaus. Whether it is your bank, or say Discover Card or even your cell phone provider- if you pay for a regular service or move funds through a business, more likely than not that business shares your reliability (or non-reliability) to meet payments with the credit bureaus.
“Okay,” you’re probably saying, “That’s a little creepy but so what?” The first problem is the credit bureaus don’t automatically include you, the consumer, in this process- you have to ask for your credit report. Luckily that is fairly simple do online and free from each credit bureau once a year. The safest and most reliable site for this is annualcreditreport.com. They won’t try and sell you “credit services” unlike other sites that promise to deliver your credit report for free.
As identity theft becomes more and more prevalent prevention is going to rest not just with businesses but with the consumer. Checking your credit report annually is a good step towards monitoring your safety in this regard.
Another reason to monitor what the credit bureaus are reporting about you is that mistakes can happen. Do you have a common name? Maybe you are getting someone’s information on your report and they are financial delinquents. Did you have an issue with a collection agency (link to that article here) a few years ago that was resolved? The agency probably reported the problem but they don’t always report the resolution. It is possible that you are getting higher interest rates because of a reporting error.
And this is a central issue with the credit bureaus and reporting problems- late or non-payments are almost always reported but the same doggedness is not applied to your reliability as a credit using consumer. In other words, all the “bad” stuff that you do gets noticed but not all the “good” stuff does. That’s why you have to stay on top of these guys and look at your report from the big three at least once a year.
Another option that gets you more involved in this process and therefore more in control of your own financial freedom (link to this article here) is enrolling in an emerging credit bureau that lets you build a solid credit history by factoring in bill payments you make regularly and on time- like your rent. PRBC.com also doesn’t share your information without your permission and you can view your report anytime. Granted it is more work for you, but greater control over your credit might be worth it in the long run. It is something to certainly consider.
Topics: Credit Repair |
