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Credit Report
At its most basic, a credit report is a history of a company’s or individual’s financial dealings, particularly the record of debt repayment. From hard-to-access paper files of the 1950s to the computerized data of today, the credit report has changed a great deal in its characteristics, but not so much in its role.
Your credit report is the primary evidence you have of your personal or corporate financial habits. When you sign up for credit cards and take out loans, your signature on the dotted line permits the creditor to both obtain and generate information about your mutual dealings. Today, this information is aggregated into credit reports by three major firms, the Big Three reporting bureaus – Experian, Equifax and TransUnion.
Scores and more
To save time on credit applications, a company called Fair Isaac Corporation developed the three-digit credit score – hence the score’s acronym, FICO. It is a numerical credit score that results from a comprehensive analysis of your payment and employment patterns, debt management, assets and so on. Scores average between 300 and 850 (higher is better) at all three reporting agencies, although you may see slight differences in the scores between one credit report and another from a different service.
Essentially, what the credit score and credit report are intended to convey is the likelihood that you will repay a debt of a certain size over a certain period of time. This means that the amounts of debt your have successfully managed is important, too. You may have a great record of paying off $200 credit card bills, but that history by itself would probably not qualify you for the best rate on a $200,000 home loan. Everything counts: length of employment, amount of debt successfully discharged, income potential and so forth.
The fact is, you should not only see your credit report at least once per year, you should closely study it to ensure that there are no errors. It is the consumer’s responsibility to ensure the accuracy of credit report information, which is why Federal law allows you to get a free report annually from the reporting bureaus.
Keeping things straight
If you do discover errors on your credit report, you must take up the issue with the reporting company, loan originator and/or financial institution. The bureaus themselves are rarely able to remove incorrect data simply on your say-so, but are legally obligated to do several things on your behalf.
First, they must post your objection (sometimes limited to 50 words) adjacent to any information that you are disputing. And second, they must comply with the request of any firm or individual who wishes to retract or revise their negative report(s). If you are getting nowhere with your credit reporting battle, you can call on both private and governmental agencies that will intercede with the reporting bureaus for you.
The Federal Trade Commission (FTC) is the agency that oversees Federal laws concerning credit reporting, such as the Fair Credit Reporting Act (FCRA). They maintain a very informative Web site, as do several non- and for-profit organizations that help to “repair” your credit.
Your credit report, and the three-digit credit score that “summarizes” your creditworthiness, will have a tremendous effect on your quality of life. If you are young and just beginning your independent financial life, start out strong and develop good money habits. If you have made some mistakes, find out how to clean up your act – and then clean up your credit report so it actually reflects the kind of person you are now.
Either way, it is your responsibility to ensure that your credit report is accurate. If you haven’t checked (and double-checked) yours in over a year, request your free annual credit report from any of the Big Three bureaus and do so as soon as possible.
Topics: Credit Repair |
