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Overview of Credit Reports & Credit Bureaus


Having access to credit augments your spending power by enabling you to tap funds that you either do not have at the present time or would rather allocate elsewhere. However, creditors aren’t likely to trust you with much, if any, of their money if you don’t have a track record of paying back what you borrow.

Your credit report/credit history is how they keep track. It is the record of how you’ve used the credit that’s been made available to you as well as whether or not you’ve upheld certain other types of financial contracts.

Inside Credit Reports

Credit reports track your payment history for many types of bills – including credit cards, car loans, mortgages, student loans, and even cell phones – and classify each of your accounts based on whether or not you have submitted payments at the time and of the amount specified by your account agreement.

How good your credit is therefore depends largely on the following two factors:

  1. How often you pay your bills on time (always, sometimes, rarely, etc.), and;
  2. The length of time you’ve been using credit.

Credit report information that reflects accounts in good standing will tell lenders that you are responsible, while delinquent payments will make it harder or more costly to access credit in the future – especially if you’ve been using credit for a relatively short period of time.

In other words, understanding your credit reports and avoiding common consumer misconceptions is extremely important. What are some examples of such misconceptions? Well, according to consumer law expert Cary Flitter, they are as follows (in no particular order):

  1. “That it is difficult or cumbersome to request a credit report annually. It isn’t.
  2. That requesting your own credit report on more than one occasion in a year will reduce your score. Requesting one’s own credit report is not supposed to affect the score at all.
  3. That you need some advanced degree to read/interpret them. The consumer actually gets a ‘consumer file disclosure’ which is a more simplified format of the credit report (and is supposed to reflect all of what’s in the credit report).
  4. That there’s nothing you can do and if you had an old overdue account, it will just haunt you. Sometimes if you submit a legitimate dispute, it’s less trouble for the lender to remove the negative than to do a proper investigation.”

Credit Bureaus: Experian, Equifax & TransUnion

The companies that track credit report information for banks as well as other lenders, employers, and various decision makers across industries are known as “credit bureaus,” or “credit agencies.” Three bureaus in particular dominate this market, and you can find a bit of information about each below.

  • Equifax: Equifax is the oldest of the three major credit bureaus. The Equifax customer service department can be reached at: 1-800-685-1111. Its mailing address is: Equifax Information Services, LLC / P.O. Box 740256 / Atlanta, GA 30374
  • Experian: Experian is the youngest of the three major credit bureaus, and its customer service department can be reached at: 1-888-397-3742. Its mailing address is: Experian / P.O. Box 9701 / Allen, TX 75013
  • TransUnion: TransUnion is the smallest of the three major credit bureaus, and its customer service department can be reached at: 1-800-916-8800. Its mailing address is: TransUnion, LLC / P.O. Box 2000 / Chester, PA 19022

The following graphic will give you a sense of what an account (i.e. a “trade line”) looks like when expressed on a TransUnion credit report.

You had better familiarize yourself with these reports – as well as what they do and do not include – since credit history can be the determining factor when you want to get a new credit card, sign a lease on an apartment, buy a car, buy a home, or even apply for a new job.

Fortunately, each major credit bureau is required by law to provide every consumer with a free copy of their credit report once a year, upon request. Find out how to get your free government credit report and compare other free credit report providers.

Who Can Look at Your Credit Reports?

The Fair Credit Reporting Act (FCRA) dictates which organizations and individuals can access consumer credit reports. In general, this law limits access to creditors, government agencies, and third parties with “legitimate” business needs to whom you have granted permission. More specifically, consumer reporting agencies may provide the following entities with access to your files under certain circumstances:

  • Financial Institutions – In order to evaluate applications for financial products and conduct periodic customer performance reviews.
  • Insurance Companies – For policy underwriting purposes.
  • Credit Monitoring Services – Whom you’ve hired to notify you of changes to your credit profile, perhaps signaling credit improvement or evidence of identity theft.
  • Government Agencies – For professional licensing and law enforcement purposes. In many cases, access is limited to only biographical information (e.g. name, address, and employer).
  • Child Support Agencies – State and local child support organizations may view credit data in order to determine payment capabilities.
  • Landlords – To determine ability to pay as a result of a rental/lease application.
  • Courts – May order credit report access if necessitated by legal proceedings.
  • Businesses – A company that has a legitimate need to access your credit data as a result of a business transaction that you initiated.
  • Employers – Current and prospective employers to whom you’ve given permission (most states require written consent, but some – like Vermont – only necessitate oral permission) in relation to hiring decisions.

In most cases, your permission is a prerequisite to credit report access. However, it’s important to note that it’s not always explicitly obvious when you are granting an organization permission to view your credit data. For example, the terms and conditions of a credit card offer will include language that authorizes the credit card company to pull your credit reports not only in conjunction with making an approval decision, but also on an ongoing basis for the length of your tenure as a customer. When you submit a credit card application, you are effectively agreeing to these stipulations whether you notice them ahead of time or not.

What’s more, it’s particularly important to understand when a credit check is warranted for employment purposes because some employers have been known to abuse the privilege. “Credit checks should only be conducted when job relevant (e.g., cashier position, accountant position, Director of Finance),” says Jill Ellingson, associate professor of management & human resources at Ohio State University. “If individuals have fiduciary responsibilities as part of their job, then credit checks can be informative. Such checks can reveal elements of fiduciary integrity as well as highlighting the credit risk that a particular individual brings. Individuals facing financial challenges may be more prone to take questionable or illegal actions in conjunction with their access to firm funds.”

Ultimately, access to credit data is a very important aspect of personal finance that the general population must become more familiar with. “Consumers need to take their credit histories seriously and understand that credit reports can show every mistake one has made and that a poor score is costly,” says Maureen Karig, senior research associate with the University of Missouri – St. Louis’ Center for Business and Industrial Studies. “I would advise, while understanding one’s own credit report and score is important, understanding how to better manage one’s finances is the key.”

You should also keep in mind that you can restrict unapproved access to your credit reports by opting-out of preapproved credit card offers.

Which Credit Reports Do Lenders Check?

Financial institutions use consumer credit data to help decide whether or not to issue credit cards, auto loans, mortgages, and various other financial products. That much is clear to most people. The particular credit bureau(s) from which each lender gets its information is far less understood. That’s not surprising, however, considering how tight-lipped banks tend to be about their underwriting procedures.

Ultimately, the answer is that each lender has its own policy. Some use information from a single credit bureau, others get data from 2-3. The vast majority of lenders get their information from one or more of the major credit bureaus (i.e. Experian, Equifax, and TransUnion), while some may also supplement that with data from alternative credit bureaus. Those that work with multiple agencies, or consider numerous types of credit scores, either average the data or use median figures.
Image: Pressmaster/Shutterstock

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