CREDIT REPORTS

Your credit report is a record of information collected from your creditors, which summarizes your credit history. When you apply for a line of credit – your bank, credit card company, or mortgage lender uses your credit report to evaluate the potential risk of lending money to you. Employers, landlords, and insurance companies may access this information as well.

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 there are any actions taken against you because you didn’t pay your bills, or if a company had to write off a debt that was not repaid by you – that will be on your credit report. Delinquent debts will remain on your account for seven years unless the creditor chooses to remove that debt. A Chapter 7 bankruptcy will remain on your credit history for 10 years. A Chapter 13 bankruptcy remains on your credit record for 7 years. In either case, your credit score will plummet, and you will not be able to get any type of credit during that time. Matters of public record, such as a tax lien or foreclosure, may also appear on your credit report.

The process of credit scoring that we use today was first developed in the 1950′s, over the years this process has increased tremendously since the early 1980′s. Using statistical models to assess an individual’s credit worthiness, the three major credit bureaus – Experian, Equifax, and Transunion – calculate your credit score based on your credit history and your performance in paying off your current credit accounts.

The credit bureaus compile information that is provided to them by your creditors, and use that information to calculate your credit score. Working with a company called Fair Isaac, the credit bureaus developed a scoring model in the 1980′s that allowed each bureau to offer its own credit score, based entirely on the content of that credit bureau’s data.


Each of the three major credit bureaus uses its own unique system for compiling data and calculating scores. However, scoring models are relatively normalized, to the extent that your credit score at one bureau will be roughly equivalent to your score at another. For example, if you receive a score of 680 from Experian, you can expect a score somewhere in the same range from the other two bureaus, even though the calculations used to arrive at that score are different.

Your credit report includes all of the detailed information that your credit score is based on. Any bank accounts, credit card accounts, utility accounts, mortgages, student loans, line of credits, or installment loans which have been taken out in your name may appear on your credit report; as well as, any outstanding monetary judgments, tax-leans, or bankruptcy filings. It’s important that this information be accurate since it’s the information that your credit score is based on. But what happens when there are mistakes in your credit report?

It’s not unheard of for anyone to find errors in their credit report for a variety of reasons. Identity theft or plain misinformation can attribute any number of errors to your credit history. If that happens to you, you are allowed to dispute any inaccurate information with the credit bureau and get it removed from your credit report. Under law, both the credit bureau and the information provider are responsible for correcting any inaccurate information. They also must investigate any disputes within 30 days and notify you of a resolution.

Credit locking is a way to “freeze” your credit report and prevent identity thieves from opening a credit account or a loan in your name. When you opt to lock your credit, no-one can access the information in your credit file or open a new account in your name – not even you!

Credit locking is effective if you want to make it harder for identity thieves to access the sensitive information in your credit file. If you want to open a new credit account while the credit lock is in effect, you will need to give lenders a PIN number that allows them access for a certain number of days. After they have checked the information in your credit report, the reports are locked again.

Most people are not aware that locking their credit report is an option, or they confuse it with a “fraud alert” – which allows consumers to put a “red flag” on their accounts to alert the consumer credit bureaus of fraud. But credit locking is a more recent option for consumers, and many believe it is more effective. California was the first to pioneer the credit freeze law in 2003, and now 38 additional states and the District of Columbia have subsequently passed laws to allow residents to lock their reports. Now the three major credit bureaus – Experian, Equifax, Experian – are offering the option of credit locking to any consumer that wants them.

Generally, when people talk about your credit score, they mean your FICO score, developed by Fair Isaac to be a three-digit representation of the information in your credit report. Using this score, lenders will determine the likelihood of your default on a loan, and whether you will make timely payments if they lend you money.

In reality, however, there are actually three different credit scores on your record, one for each of the three consumer credit bureaus: Equifax, Experian and Transunion. Since each of the three credit bureaus collects and reports information independently, they may give you scores that differ, sometimes widely. Different credit bureaus may have different information on file, and they may also use different models to calculate your score. But generally, the FICO score developed by Fair Isaac is the standard by which the credit bureaus operate.

There are three major consumer credit reporting bureaus – Equifax, Experian and TransUnion. These are three separate agencies, but they are all in the business of collecting and reporting consumer credit information. Lenders, credit card companies, insurers, landlords and utility companies all use the information provided by these agencies to make decisions about your creditworthiness as a borrower or customer.

The credit bureaus keep an invisible paper trail of all of your account activity when it comes to credit and loans. When you make a payment on your credit card, or open a new account, this information is reported to the credit bureaus and added to your credit report. If you default on an account, or if you are habitually late on your payments, that is reported to the credit bureaus as well. Your three digit credit score is a summarization of the information on your credit report, and helps lenders to see at a glance what sort of history you have had with credit.


In addition to collecting information, the credit bureaus distribute information as well. When you apply for a mortgage or an auto loan, for example, the lender will contact one or more of the three credit bureaus to inquire about your credit history before making a decision. This inquiry, too, becomes part of your credit report, and is known as a “hard inquiry.” “Hard inquiries” are inquiries that come from a lender who is inquiring for the specific purpose of extending you credit. When you check your own score, it is a “soft inquiry” and does not count against you. Numerous hard inquiries, however, can have a negative impact on your score because it indicates that you are a distressed borrower who is desperate for more credit.

When calculating your credit score, the credit bureaus give a lot of weight to your payment history; about 35% of your score is based upon your history of timely payments on your account. But before you panic over that time you paid your bill a couple of days late, relax – the credit bureaus don’t treat all late payments the same way. Some payments are later than others.

For example, if you go away on vacation, come back, and realize that your credit card bill was due on the 15th and not the 17th, you might incur a late fee (and even an interest rate hike) if your payment is a couple of days late. But that payment will still be reported as “on time” to the credit bureaus. It is only when a payment is thirty or sixty days late that it will “ding” your credit rating. This effect will be felt most severely in the month that the late payment occurred, and over the next six months or so, your score will go back up again as long as you don’t have another late payment.

Your credit score, or FICO score, is a three-digit number that represents a statistical analysis of your creditworthiness. Your credit score is based on the information in your credit report, which is usually sourced from the three major credit bureaus: Experian, Equifax, and Transunion. Since each of the three credit bureaus collects and analyzes information independently, they may give you scores that differ, sometimes widely. But in general, the factors that make your score go down will be the same at all three bureaus.

The information in your credit report reflects your bill-paying history and debt profile. If you are late on a payment by 30, 60, or 90 days, that will be noted in a credit report. If you default on a loan or a credit card, or if a bank has to “charge off” a debt that you incurred, those will be noted on the credit report as well. All of these factors will be analyzed when determining your three digit credit score. Typically, factors that would be analyzed in determining your score would be things like:

If you want to buy a car, apply for a mortgage, or get a credit card, you probably know that the lender will be pulling your credit score. Credit scores, or FICO scores, are 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. There are plenty of other situations in which your credit score can play an important part in decisions that affect your life. Insurance companies, landlords, utility companies, and even employers are checking credit scores these days. A credit check has become a routine part of a renter’s background check in many places. There are also 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.

Credit scores, or FICO scores, are 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. When you apply for a mortgage loan, one of the main things a prospective lender will look at, when determining your creditworthiness, is the average of your credit rating as it is presented by the three major national bureaus. They will also look at your credit reports, how much revolving debt you have on your credit cards, and whether you pay your bills on time.

The credit bureaus keep an invisible paper trail of all of your account activity when it comes to credit and loans. When you make a payment on your credit card, or open a new account, this information is reported to the credit bureaus and added to your credit report. If you default on an account, or if you are habitually late on your payments, that is reported to the credit bureaus as well. Your three digit credit score is a summarization of the information on your credit report, and helps lenders to see at a glance what sort of history you have had with credit.