CREDIT REPORTS

If you want to buy a car, apply for a mortgage, or get a credit card, you probably know that your credit report is one of the primary tools used by lenders to try to assess the likelihood of your default on a loan, and whether you will make timely payments if they extend credit to you.

What you might not realize is that plenty of other people are looking at your credit score besides creditors. In fact, anyone with a “permissible purpose” can gain access to your credit report, including government agencies, child support enforcement agencies, and anyone who wants to be in business with you. One of those “permissible purposes” is potential employers who want to do a credit check. Even your current employer can legally access your credit report, and may choose to do so if you are up for a promotion, or even as part of a routine background check of current employees.

Not all employers require a credit check as part of their conditions of employment. If you want to work in a bank or other financial institution, a credit check will almost certainly be part of your background vetting. But these days, many employers may choose to exercise their legal right to view your credit report as part of your job application. However, unlike some other businesses such as banks or insurance companies, your employer cannot pull your credit report without receiving written permission from you first.

Your credit report contains highly sensitive information, including your social security number, your past addresses, and even the names and addresses of your past employers. However, it is perfectly legal for information on your credit report to be used to advertise you as a customer to anyone who wants to do business with you, including creditors and companies who pull your credit scores for “promotional purposes” – that is, they want to see if they should market their services to you. Whenever you receive a “pre-approved” or “pre-screened” offer of credit, this is because the bank or company who is offering credit to you has either pulled your credit information through a “soft inquiry,” or the credit bureau has sold your information as part of a “trigger lead” program.

If you are not comfortable with being part of this targeted advertising campaign, you can choose to opt out of receiving pre-screened credit offers by going to www.optoutprescreen.com. You can also call the 1 800 number that was set up by the credit bureaus, 1-888-5OPTOUT, if you prefer to opt out of receiving prescreened credit offers over the phone. When you call this number, the automated system will ask you to provide certain information such as your phone number and social security number. If you are not comfortable doing that, and would prefer to speak to a real person when giving your personal information, you will need to call each of the credit bureaus separately.

Actually, yes. You may be surprised to learn that any business with a “permissible purpose” can gain access to your credit report, including anyone who wants to be in business with you. “Permissable purposes” include creditors and companies who pull your credit scores for “promotional purposes” – that is, they want to see if they should market their services to you. This is perfectly legal and admissible. These inquiries then become part of your credit report – but they are called “soft inquiries.” “Hard inquiries” are inquiries that come from a lender who is inquiring for the specific purpose of extending you credit. Numerous hard inquiries can have a negative impact on your score, but soft inquiries have no impact whatsoever.

Whenever you receive a “preapproved” or “prescreened” offer of credit, this is because the bank or company who is offering credit to you has either pulled your credit information through a “soft inquiry,” or the credit bureau has sold your information as part of a “trigger lead” program. “Trigger leads” happen when you authorize a lender to access your credit report in reference to a loan application, or other type of credit application. If you meet certain searchable criteria that lenders are looking for (such as age, state of residence, annual income, and credit score), the credit bureau may send your name, address and telephone number to lenders who are part of the trigger lead program, in order for them to solicit your business.

If you have ever had a credit card stolen or been the victim of identity theft, you know how a wrong negative item can wreak havoc on your credit score. Even misinformation and simple human error can result in mistakes and negative items on your credit report. For example, you could pull your credit report tomorrow and find out that someone in Texas shares your name, but not your history of on-time payments – and their credit card account has been mistakenly attributed to your file! If that happens to you, you’ll want to know how to correct any wrong negative items in your credit report.

In order to dispute an error in your credit report, it’s advisable to send a letter to the consumer credit bureau (or bureaus, if more than one report is inaccurate) and notify them in writing of the erroneous information. In your letter, you should identify the item or items you dispute, explain your position and request that the information be removed or corrected. It helps to include copies of any documents that support your dispute, such as letters from the creditor confirming that you have paid off the account.


Some credit bureaus also allow you to dispute negative items on your credit report online, at their website. While this may save time, it is not always as effective as sitting down and typing an old-fashioned letter – if for no other reason than that it gives you documentation to support your case.

What is an “Investigative Consumer Report,” and how does it differ from a credit report? As it turns out, there is quite a substantial difference between an investigative consumer report and a credit report.

Your credit report is a collection of data, gathered from your creditors, which summarizes your credit history. When you apply for the credit, your bank, credit card company or mortgage lender uses your credit report to evaluate the potential risk of lending money to you. Although the data can be boiled down to a three digit numerical score, it makes no inference about your general reputation or character. You could be a falling down drunk and a wife-beater, but as long as you pay your bills on time, your credit report will be spotless.

An “investigative consumer report,” on the other hand is a form of credit report that is more like a detailed background check. In addition to covering your general creditworthiness, it also involves the gathering of information on your “character, general reputation, personal characteristics or mode of living.” The gathering of that information may even include interviews with your neighbors, friends, and other associates about your lifestyle, character, and reputation.

You’re overwhelmed by debt and every other message on your answering machine is from a collection department. You’re not sure how to deal with your bills, and the thought of bankruptcy has even crossed your mind. Suddenly, you see an advertisement from a credit repair company claiming that they can wipe away your bad credit record and give you a new credit identity. Or, they promise to remove negative items from your credit report and boost your credit score. For their “expertise” they will, of course, charge you a nominal fee. If this sounds appealing to you, walk quickly in the other direction because this type of “credit repair” might only make matters worse for you.

One common tactic employed by these credit repair companies involves disputing every negative item on your credit report. These credit repair scam companies will assure you that, while you dispute these items, the item will be temporarily removed while the credit bureaus verify its accuracy. “Credit fixing” tactics such as this were fairly commonplace twenty years ago, but in the age of computers, it doesn’t usually work that way. Accurate information can be verified within hours. If you dispute accurate items, you run the risk of your dispute being flagged as “frivolous.” Even in the unlikely event that your credit is “fixed” and the item is dropped, if the negative item is accurate, your creditor can simply report the same item to the credit bureaus again next month– after you’ve already paid the credit report scam company for “repairing” your credit.

From the time that you get your first credit card, the three major credit bureaus begin to track your behavior with credit, and you begin to establish your credit history. You may be tempted to go crazy with that first credit card, but if you want to protect your credit rating, you need to learn to use credit responsibly.

What does it mean to use credit responsibly? Opinions vary, but if you follow a few basic guidelines, you will be well on your way to building good credit.


First, get in the habit of only charging what you can afford to pay for. It may be tempting to treat that credit card as free money, which enables you to purchase “big ticket” items that you otherwise wouldn’t be able to afford. However, this is a quick way to get in trouble with credit and get in over your head in debt. Before you buy that leather couch or the Xbox 360, do the math and see if it fits in your budget. If you show the bank that you only borrow what you can afford to pay back, you’ll find it much easier to borrow again in the future.

If you declare a Chapter 13 bankruptcy, it remains on your credit record for 7 years. A Chapter 7 bankruptcy will leave its mark on your credit history for even longer: 10 years. In either case, your credit score will plunge and you will find it difficult to get any form of credit during that time. However, while a bankruptcy can deal a devastating blow to your creditworthiness, the effects do not have to be long-lasting.

While a bankruptcy filing will remain on your record for the full legal term, you can begin to diminish its effect the day after it is filed by adopting good habits with your credit and not biting off more than you can chew. Here are a few things that you can do to help raise your score and build good credits after bankruptcy.


First, there are two forms of credit you will need to rebuild if you have filed for bankruptcy. Those are:

Your credit report is a record of information collected from your creditors, which summarizes your credit history. When you apply for credit, your bank, credit card company or mortgage lender uses your credit report to evaluate the potential risk of lending money to you. In your credit report, the lender will find out what credit card accounts and loans you have, whether they are in good standing, and whether you make payments on them in a timely manner.

If any action has been taken against you because you didn’t pay your bills, or if a company had to charge off a debt that was not repaid by you, that will be on your credit report, too. Delinquent debts, late payments, or bankruptcy filings, also appear on your credit report. Matters of public record, such as a tax lien or foreclosure, may also be reported to the credit bureaus as well.

They say breaking up is hard to do, but can it be hard on your credit score? Unfortunately, the answer can be yes if you are not careful. Many married couples have joint obligations such as a mortgage, car payment, or joint credit accounts with banks and department stores. Technically, the credit of your spouse or family member should have no bearing whatsoever on you, unless you have co-signed for an account and you both fail to meet the terms of the obligation. However, unless you both come to some agreement about how to handle joint accounts before, during, or immediately after the divorce, you may be in for some nasty surprises down the road if your ex decides to be spiteful.

For instance, what if you come home one day and discover that your spouse has run up an exorbitant credit card debt in your name, without your knowledge? You may have a hard time proving that you were not responsible for the debt. If you are the primary card holder, you will probably be held responsible for this unless you can prove that it is a case of outright fraud. For instance, if your ex re-opened the account after your divorce, or forged your signature, that would be a clear cut case of credit card fraud. Even so, you will have to have proof, and will probably need to write a few letters to the bank to get it resolved.