Consumer Protection Topics - Credit Reports
Credit Reports Basics
A credit report is a detailed record of how you've managed your credit over time. Credit reports are used most often by lenders to determine whether to provide you with credit and how much you will pay for it. Credit reports are also used by insurance companies, employers, and landlords.
Your credit score is a number that is developed by a computer model based exclusively on the information in your credit report, and it is intended to predict, for example, how likely you are to repay your debts. For most major scoring models, whether you repay loans as agreed (on time) is generally the most significant factor influencing your score. Another key component of your credit score is how much you currently owe on each account compared to its original loan amount or credit limit. Additional factors include how long you have had your current loans and credit cards, the types of credit accounts you have, and how many recent "credit inquiries" you have.
You can request a free copy of your credit report from each of the three major credit bureaus — Equifax, Experian and TransUnion — once every 12 months, as well as under certain other circumstances, such as if you've been denied credit or employment based on your credit report or if you believe you may be a fraud victim.
To order your free annual report from any of the three major credit bureaus, there is only one place to go: www.AnnualCreditReport.com or call toll-free 1-877-322-8228. Remember to review each report carefully, as the information in your file at each bureau may vary. And, if you receive a notice that a lender or another entity used a credit report from a company other than one of these three credit bureaus, request your free copy from that bureau, too.If you are interested in knowing your credit score, you can order one for a small fee from a number of outlets, most of them accessible online. When doing so, though, think carefully before signing up for a subscription to additional services, which can be costly. If a lender uses a credit score to help set material terms (such as the interest rate) on your loan or credit card, the lender, in most cases, must inform you of the score and related information free of charge.
Consumer Protections Available
The Fair Credit Reporting Act (FCRA) promotes the accuracy, fairness, and privacy of information maintained by credit bureaus. Consumer protections under the FCRA include:
- Anyone who uses a credit report or another type of consumer report to deny your application for credit, insurance, or employment – or to take another adverse action against you – must tell you, and must give you the name, address, and phone number of the agency that provided the information.
- You may request and obtain all the information about you maintained by a credit bureau. You are entitled to a free file disclosure:
- Once every 12 months;
- If a person has taken adverse action against you because of information in your credit report;
- If you are the victim of identity theft and place a fraud alert in your file;
- If your file contains inaccurate information as a result of fraud;
- If you are on public assistance; or
- If you are unemployed but expect to apply for employment within 60 days.
- You may request a credit score from credit bureaus that create scores or distribute scores used in residential real property loans, but you will have to pay for it. In some mortgage transactions, you will receive credit score information for free from the mortgage lender.
- If you identify information in your file that is incomplete or inaccurate and report it to a credit bureau, it must investigate unless your dispute is frivolous. See www.ftc.gov/credit for an explanation of dispute procedures.
- Inaccurate, incomplete or unverifiable information must be removed or corrected, usually within 30 days. However, a credit bureau may continue to report information it has verified as accurate.
- In most cases, a credit bureau may not report negative information that is more than seven years old, or bankruptcies that are more than 10 years old.
- A credit bureau may not give out information about you to your employer, or a potential employer, without your written consent.
Tips for Credit Reports
- Pay your loans and other bills on time. Even if you fell into trouble in the past, you can rebuild your credit history by beginning to make payments as agreed. Paying your debts on time will have a positive effect on your credit score and can improve your access to credit.
- To help show that you have not borrowed too much, try to minimize how much you owe in relation to your credit limit. Don't automatically close credit card accounts that have been paid in full and haven't been used recently because that may lower your available credit. However, you may want to close a card with a zero balance if you pay a monthly fee for the card.
- If you believe you cannot repay your creditors, contact them immediately and explain your situation. Ask about renegotiating the terms of your loan, including the amount you repay. Reputable credit counseling organizations also can help you develop a personalized plan to solve your money problems, but less-reputable providers offer questionable or expensive services or make unsubstantiated claims.