A credit score is a number that reflects your risk level, as an individual, to a lender. The higher the number, the lower the risk will be to the lender. As you apply for increased credit or attempt to make a purchase, the lender will check your ability to pay back that loan. The more negative marks you have on your credit report, the less likely you will be granted the loan or purchase you requested.
Credit scores are not fixed; instead they reflect a consumer’s current credit situation, based on the information in the credit report at the time the report is pulled.
A credit report is a history of your use of credit and other personal information which gives lenders a snapshot of your credit history. Whether you are applying for a credit card, a car loan, a personal loan or a mortgage, lenders want to determine your credit risk level. In short, lenders want to know if they can rely on you to pay them back on time.
There are three major credit reporting agencies: Equifax, Experian and TransUnion. These agencies collect data and maintain records on millions of Americans and their bill payment histories. The reports tell lenders how much credit you’ve used, what types of credit you’ve used, how long you’ve had various accounts, and whether you pay your bills on time. Every year, billions of lending decisions are based upon the information in those reports.
Your credit report and score strongly influences how much credit that will be made available to you and the terms you are offered by lenders. The speed you are approved for credit, the interest rates you get, and decisions about the amount of credit are all determined by the information found in your credit report.
Although each credit reporting agency formats and reports this information differently, all credit reports contain basically the same categories of information.
Information.Your name, address, Social Security number, date of birth and employment information are used to identify you. These factors are not used in credit scoring. Updates to this information come from information you supply to lenders.
Trade Lines.These are your credit accounts. Lenders report on each account you have established with them. They report the type of account (bank card, auto loan, mortgage, etc.), the date you opened the account, your credit limit or loan amount, the account balance, and your payment history.
Credit Inquiries.When you apply for a loan, you authorize your lender to ask for a copy of your credit report. This is how inquiries appear on your credit report. The inquiries section contains a list of everyone who accessed your credit report within the last two years. The report you see lists both “voluntary” inquiries, initiated by your own requests for credit, and “involuntary” inquiries, such as when lenders order your report so as to make you a pre-approved credit offer in the mail.
Public Record and Collection Items.Credit reporting agencies also collect public record information from state and county courts, and information on overdue debt from collection agencies. Public record information includes bankruptcies, foreclosures, law suits, wage attachments, liens and judgments.
The formula used to calculate your credit score includes information based on several factors:
- 35% on your payment history
- 30% on the amount you currently owe lenders
- 15% on the length of your credit history
- 10% on the number of new credit accounts you’ve opened or applied for (fewer is better)
- 10% on the mix of credit accounts you have (mortgages, credit cards, installment loans, etc.)
No. Credit reporting companies are just that – companies. They are in business to make money, and they generate their income by selling credit reports to creditors.
Negative credit accounts, or trade lines, can remain on your credit report for up to 7 years, and bankruptcies and other public records for up to 10 years. Inquiries on your credit report may remain for 2 years. These are the maximum times that are permitted by federal law for reporting agencies to show negative items; however, these times are not mandatory. At any time, a creditor or credit bureau may remove a derogatory remark from your credit report if the consumer requests an investigation into remarks that they feel are incorrect.
No, all information reported by the credit bureaus are subject to the same laws and criteria. We may challenge on your behalf any items you request and the credit bureaus must investigate these items.
It is your credit report that creditors use to determine if they will extend credit to you. If you have inaccurate information on your report, you may be turned down for the loan you need or pay unnecessary high interest rates.
The credit bureaus collect information based on individual Social Security numbers.
Depending on which lender you go through will determine which credit bureau the item will appear on. It could be one, two or all three bureaus.
Under the Fair Credit Reporting Act, a credit reporting company may only disclose your credit report if someone is:
- Granting credit, reviewing your account, or collecting on your account
- Reviewing you for employment purposes
- Reviewing your application for insurance
- Reviewing your eligibility for a license or government-related benefits
- Providing information for a business transaction, such as renting an apartment
- Has a court order
- Has an IRS subpoena
- Someone to whom you have given written permission
It is estimated that as many as 80% of credit files have errors. If your credit report contains errors, it is often because the report is incomplete, or contains information about someone else. This typically happens because:
- You applied for credit under different names (for example, Margaret Jones versus Margaret Jones-Smith)
- Someone made a clerical error in reading or entering name or address information from a hand-written application
- You gave an inaccurate Social Security number or the number was misread by the lender
- Loan or credit card information was inadvertently applied to the wrong account
Only the credit bureaus have the power to remove items from your credit report. But, as required by law, the credit bureaus must delete inaccurate, unverifiable, or outdated information.
Absolutely. The Fair Credit Reporting Act allows anyone to dispute inaccurate items on their credit reports. There’s nothing we do that you cannot do yourself when it comes to fixing your credit situation. Individuals can restore their credit on their own but this can take time and a lot of knowledge when it comes to the credit laws. That’s why we are here to help since we have the experience and knowledge to get you the positive results.