Credit Reports 101

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The funny thing is that a person’s income or net worth has nothing to do with credit reports.  They are not taken into consideration or hold any weight at the moment your credit report is pulled, and your credit score is automatically calculated.

When a creditor or lender looks at a credit report, they view balances carried over month to month as overspending on a budget. Translating that you may have trouble managing your finances even if that’s not the reality. Staying in the know about your finances can be quite a task. Fortunately, you have access to your own personal credit report free of charge. Read on to learn the basics about credit reports.

What is a Credit Bureau?

A credit bureau is a consumer reporting agency (CRA) who collects data about funds you borrow. A credit bureau keeps track of when you apply for loans, how much you received, and how well you do at paying your bills on time.
Also, a credit bureau knows whether you’ve ever left a credit account unpaid and how much you owe to each of your creditors.
Credit bureaus store the information in databases. They sell the information to all kinds of entities for a variety of reasons. But the bottom line is profit. Every credit report that is pulled, they receive a cut. Their paying customers will access their databases to market their credit products to targeted audiences.

They do not look out for consumer’s best interest. Consumers get caught up in the relationship between them and data furnishers who choose to report their information. It is not mandatory for businesses to report to them.

The credit bureaus are not a government agency, they are businesses that process millions of credit information each month. They hire employees for minimum wage that are under tremendous pressure to meet quotas.

Credit disputes are outsourced to other countries where vendors have no experience with US credit system because labor is cheaper.

What is a Credit Report?

Your credit report is a detailed summary of your credit history, maintained by credit bureaus. This document serves as your financial reputation. Your credit report includes:

1. Personal information – Name, address , Social Security number, date of birth, and phone number.
2. Credit accounts – Details about your current and past credit accounts including:
   • Account types (credit cards, loans, mortgages)
   • Opening dates
   • Credit limits or loan amounts
   • Balance history
   • Payment history
   • Current status
3. Public records – Financial-related legal events such as bankruptcies
4. Inquiries – Records of who has accessed your credit report and when, typically divided into:
   • Hard inquiries (when you apply for credit)
   • Soft inquiries (check-ups from current lenders and creditors, pre-approvals)
5. Collection accounts – Debts that have been transferred to collection agencies

How Can You Obtain a Copy of Your Credit Report?

It’s not difficult to get your credit report. You can visit Annualcreditreport.com or simply call the 800 numbers and request a copy of your report. You’re allowed one credit report per year free of charge from each of the following credit bureaus:

1.Equifax. The address is P. O. Box 740241, Atlanta, GA 30374-0241. Their phone number is: (888) 766-0008.
2.Experian. The address is, P. O. Box 2002, Allen, TX 75013. The phone number is: (888) 397 3742.
3.Trans Union. The address is, P. O. Box 2000, Chester, PA 19022. The phone  number is: (800) 916-8800.

The three bureaus frequently change their P.O. box numbers, causing delays in disputes as many letters are returned to senders.

There is a significant number of data furnishers who report to all three bureaus, but not all do.  This is due to reporting costs.  The credit bureaus only know what is reported to them. This is why credit reports will not have the same exact information on each report.

Why Should You Obtain a Copy of Your Credit Report?

• Spot identity theft early – Detect fraudulent accounts or inquiries before significant damage occurs
• Find and fix errors – 79% of all credit reports have mistakes on them that could affect their scores
• Prepare for major purchases – Identify issues before applying for mortgages or auto loans when rates matter most
• Monitor debt collection activity – Ensure old debts aren’t being improperly reported or revived
• Track credit improvement progress – See how your credit management efforts are reflected in your reports
• Verify information accuracy – Ensure closed accounts show proper status and balances
• Discover forgotten accounts – Find old accounts that might need attention

In order to stay on top of your financial life, it’s important to be familiar with credit reports. Understanding what credit bureaus do, knowing what a credit report is, understanding how to get a copy of your credit report, and knowing when and why to obtain such a report is important for having a successful financial life.