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Your Credit Report

There are few pieces of information more important than your credit report yet few know much about it. The fact is, a credit report can affect you much more than you would expect. The information on a credit report can keep you from buying that car you want, be used to deny you a job, or keep you from getting auto insurance. New legislation now gives individuals the right to request a credit report on themselves once a year from each of the reporting agencies. It used to be that the only way you could get a copy of your report was to request and pay for it directly from each agency. Otherwise, you could only receive a free copy of the single report used to deny you credit, a job, or insurance. Today, thanks to FACTA, you are now entitled to a free copy of your credit report from each of the major credit bureaus once a year.

What Information Is On The Report
The information on your credit report varies some depending on which agency’s report you are reading. In general, you will find information that identifies you by your current name, and/or any aliases you use, such as maiden name, your current and previous addresses, and date of birth, social security number, and possibly your marital status. The report will also contain public information, credit history, and inquiries.

Public information includes things such as a history of bankruptcies, foreclosures, judgments, and liens and if you have been divorced. This information is readily available through court record and other reports.

Information submitted to the agency by lenders, banks, and retail companies will also appear on the report. This will include information on your accounts such as revolving lines of credit, credit cards, house and auto loans, student loans, and your payment history. It will also list credit limits, balances and whether you had a repossession, charge-off, bankruptcy, or default as well as timeliness of payments. Information that is not collected is your race, religion, medical history, salary history, political affiliation, receipt of public assistance, criminal records or lifestyle. Anyone you have business dealings with may have acceptable information added to your credit report.

These reports also contain a list of individuals who have requested a copy of your rating. Usually you will have signed something granting permission for them to obtain this information, but not always.

How Is The Information Is Used
Credit information is being used more than ever to make important decisions about a person. It makes sense that the information is used to determine what your interest rate should be on car and mortgage loans, but it is also being used to determine your level of responsibility in other areas of your life and can influence your risk category for car and home insurance and even if you are fit for a job or promotion within your company.

The credit report can be accessed by a surprising number of individuals. All they have to do is show they have a legitimate interest in knowing your credit score or pay membership to belong to one of the credit reporting agencies. It is not unusual for utility companies, medical providers, landlords, department stores, banks, insurance companies, investigators and employers to have access to this information.

Based on this information a landlord may decide to deny your lease, a medical provider may demand a pay as you go treatment plan, utility companies may require bigger deposits, and some companies will not issue auto insurance at all if you don’t meet their criteria.

Perhaps you are beginning to see that it is critical to make sure the information collected and maintained on you is correct. It would be unfortunate to be turned down for a promotion or denied car insurance due to erroneous information on your report.

Why Is This Information Important
In the past, a human who was subject to personal bias and prejudice evaluated information collected on an individual and decided on a person’s credit worthiness. The reporting agencies came up with an objective measure of a person’s ability and likelihood of repaying a debt by considering raw data that related directly to these pertinent factors. Since creditworthiness is evaluated entirely from information on file about an applicant it is important to be sure the information being used to evaluate you is accurate.

Though the method of arriving at a credit score is different for each agency, the bottom line is the same – there is no bias in the reporting; an individual is entirely responsible for what has transpired in their financial history. This is both the bad news AND the good news. If your credit history is good then congratulations! You have worked hard to pay your bills on time and to live within your means. If your credit history is a little spotty then that is good news too, because it is within your power to improve it. There is no reason, now that you are educating yourself on consumer credit issues, why you can not build a positive credit file.

What Is The Next Move?
Now that you know what a credit report is you should order a copy of your report from each of the three major reporting agencies and evaluate it to make sure all of the information is correct.
The new law is being phased in so that consumers in the western states were able to get their free annual reports beginning December 2004; The 12 Midwestern states will be eligible beginning March 1, 2005; The Southern states will become eligible June 1, 2005; and the Eastern states on September 1, 2005. The reports can be requested by calling a toll-free number (877) 322-8228 or going on line at each company. And requesting your annual report, http://www.equifax.com/, http://www.experian.com/ and http://www.transunion.com/

In future articles we will consider what to do if you find errors on your report and other financial issues.

ADC 2005. All rights reserved.

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[1] 16 C.F.R. Part 610 and Part 698, R411005
Fair and Accurate Credit Transactions Act of 2003: Free Annual File Disclosures: Final Rule and Statement of Basis and Purpose Text of the Federal Register Notice (June 24, 2004) http://www.ftc.gov/opa/2004/06/freeannual.htm

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