The credit reporting agencies (CRAs) are credit bureaus that gather data about consumers and give it to lenders, banks, prospective employers, and others who have a valid reason to request a copy of your credit report. There are three credit bureaus in the U.S.: Equifax, TransUnion, and Experian.
The credit bureaus get information on your monthly payments straight from the organizations you have credit with, along with the court system (for liens and bankruptcies, etc.). All of this data is compiled into your credit report. It’s a very detailed report that says all there is to say about you as a consumer: who you work for, where you live, whether you pay your monthly bills on time, and so forth. The credit bureaus calculate credit scores based on the information in your credit report. Why is your credit score so vital? Because it’s how most lenders decide whether it’s safe to lend you money. What is considered a good credit score? Anything better than 630 or so will get you credit; if it’s at least 700, you’re in the top tier and you’ll get the best deals. What is the highest credit score? About 850. Typically, your credit score comes from the last two years’ worth of payments. So if you’ve been on time and current in that time, your score is probably good. The credit bureaus use secret mathematical formulas, and each CRA is different, which is why you’ll have three different (but similar) credit scores. They take into account a variety of factors:
- How much you owe
- How you pay your bills
- How old your accounts are
- The different sorts of credit you have
- How often you apply for credit.
- How high your balances are compared to how high they could be (i.e., how maxed-out you are)
You ought to get a copy of your credit report from the credit bureaus about once a year. Scour it to make sure it’s accurate and up-to-date. Make note of anything amiss. Examine it carefully to ensure that the basic info -- your name, address, employer, etc. -- is right.
Other things that might be wrong and should be fixed: bankruptcies that are over 10 years old, other negative details that are more than seven years past, inquiries into your credit from more than two years ago, accounts that don’t belong to you, late payments that in fact were not late, and accounts that are closed that are still listed as open. If an account is listed as being closed, does it say “closed by customer”? If not, see that it does. Otherwise, it may appear that the lender closed it, and it’s much better for it to have been closed by you. What if there is negative data on your credit report? You can fix such things. The Fair Credit Reporting Act guarantees you certain rights. Credit bureaus normally charge for copies of your credit report, except that you’re allowed one free copy a year. What’s more, you’re allowed a free copy at any time if you’ve been denied credit, if you’re out of work and looking for work, or if there are errors in your report due to fraud.
If you apply for credit and are turned down, whomever you applied to must tell you which credit bureau they got their information from, and you can follow up with them.
It costs nothing to file a dispute against something on your credit report that you believe is inaccurate or outdated. Just tell the credit bureau you need a dispute form, fill it out, and submit it.
Finally, here are some basic tips on improving credit history quickly and smoothly.
- Inform the credit bureau what you feel is incorrect. Send copies of any paperwork that supports your view. Mark every questionable item on your report, summarize the facts, and say why you believe the info is wrong. Send all of this through the mail, and keep copies.
- The credit bureau is obligated to investigate the items you dispute within 30 days. They send all the information you sent them on to whoever it was that reported the information in the first place -- the credit card company that says you were late one month, for example. Then that company must look into it to see if the data is correct, and report back to the credit bureau. If they can’t verify that their initial data was right -- that you were, in fact, late with that payment -- then the credit bureau must take it off your report.
- When all the research is finished, the credit bureau must send the findings to you. They also have to give you a free copy of your report if any changes have been made. Once something is removed or fixed, it can’t be reverted unless there’s a valid reason for it, and the credit bureau must inform you if that happens.
- You can request that the credit bureau send the corrections to everyone who looked at your report in the previous six months.
- If your dispute is not resolved in the investigation, you can still have the credit bureau include your dispute claim in the file, so that people looking at it will know that you disagree.
- Make sure all of your open accounts are on your credit report. Almost all of them should be anyway, but sometimes local retailers and credit unions aren’t involved. Work on getting them included so that your good credit history with them can be made known.
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