About Credit Reports
Credit reporting agencies
maintain files on millions of borrowers. Lenders making credit decisions buy
credit reports on their prospects, applicants and customers from the credit
reporting agencies.
Your report details your
credit history as it has been reported to the credit reporting agency by
lenders who have extended credit to you. Your credit report lists what types of
credit you use, the length of time your accounts have been open, and whether you've
paid your bills on time. It tells lenders how much credit you've used and
whether you're seeking new sources of credit. It gives lenders a broader view
of your credit history than do other data sources, such as a bank's own
customer data.
Creating Your Credit
Report
Your credit report does not
really exist until you or a lender asks for it. It is then compiled by the
credit reporting agency based on the information stored in that agency's file.
This information is supplied by lenders, by you and by court records.
Tens of thousands of credit
grantors retailers, credit card issuers, banks, finance companies, credit
unions, etc. send updates to each of the credit reporting agencies, usually
once a month. These updates include information about how their customers use
and pay their accounts.
Your credit report reveals
many aspects of your borrowing activities. All pieces of information should be
considered in relationship to other pieces of information. The ability to
quickly, fairly and consistently consider all this information is what makes
credit scoring so useful.
What's In Your Credit
Report
Although each credit
reporting agency formats and reports this information differently, all credit
reports contain basically the same categories of information. Your social
security number, date of birth and employment information are used to identify
you. These factors are not used in scoring. Updates to this information come
from information you supply to lenders.
- Identifying
Information.
Your name, address, Social Security number, date of birth and employment
information are used to identify you. These factors are not used in
scoring. Updates to this information come from information you supply to
lenders.
- Trade
Lines.
These are your credit accounts. Lenders report on each account you have
established with them. They report the type of account (bankcard, auto
loan, mortgage, etc), the date you opened the account, your credit limit
or loan amount, the account balance and your payment history.
- Inquiries.
When you apply for a loan, you authorize your lender to ask for a copy of
your credit report. This is how inquiries appear on your credit report.
The inquiries section contains a list of everyone who accessed your credit
report within the last two years. The report you see lists both
"voluntary" inquiries, spurred by your own requests for credit,
and "involuntary" inquires, such as when lenders order your
report so as to make you a pre-approved credit offer in the mail.
- Public
Record and Collection Items.
Credit reporting agencies also collect public record information from
state and county courts, and information on overdue debt from collection
agencies. Public record information includes bankruptcies, foreclosures,
suits, wage attachments, liens and judgments.
How Mistakes are Made
When a credit report contains
errors, it is often because the report is incomplete, or contains information
about someone else. This typically happens because:
- The person applied for credit under different
names (Robert Jones, Bob Jones, etc.).
- Someone made a clerical error in reading or
entering name or address information from a hand-written application.
- The person gave an inaccurate Social Security
number, or the number was misread by the lender.
- Loan or credit card payments were inadvertently
applied to the wrong account.