Full text of What Your Credit Report Says About You

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Federal Reserve Bank of Philadelphia
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C

redit plays an important role in
our daily lives. Many consumers use credit cards to pay for
routine purchases such as gas and groceries and to obtain longer-term financing to purchase big-ticket items such as
a home or a car. Many college students
obtain loans to finance their education.
But lenders do not automatically
extend credit to everyone. You must
apply for credit and demonstrate to the
lender that you are a good credit risk.
Lenders use several tools to evaluate
credit applications to determine if you
are likely to repay a loan, including
obtaining a copy of your credit report
from one of the three national credit
bureaus — Equifax, TransUnion, and
Experian. Therefore, it is important to
understand the information in your
credit report.
WHAT IS A CREDIT REPORT?
A credit report is a document that contains a detailed history of your credit
activities, including all of your credit
accounts (e.g., credit cards, mortgages,
car loans, etc.) and any negative public
records relevant to your creditworthiness (e.g., tax liens, judgments, bankruptcies).
WHERE DO CREDIT REPORTS
COME FROM?
Credit reports are compiled by the
credit bureaus. A credit bureau is an
agency that collects information about
the credit activities of individuals
and businesses from creditors, public
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records, and other sources and then creates reports based on this information.
The credit bureaus charge lenders a fee
to obtain these credit reports. Although
most creditors obtain credit reports
from the three national bureaus, some
smaller regional credit bureaus also
provide these reports. Creditors will
typically obtain only one credit report
when you apply for a relatively small
credit amount (such as a credit card
with a $3,000 limit), while they will
typically obtain copies of your credit
report from all three national bureaus
when you apply for a larger credit
transaction (such as a home mortgage).
WHO IS ALLOWED TO SEE MY
CREDIT REPORT?
Under the Fair Credit Reporting Act, a
federal law, credit bureaus can provide
the information in your credit report
only to the following requestors: 1)
creditors reviewing a new application
for credit or conducting a review of an
existing account; 2) employers considering you for employment, promotion,
reassignment, or retention; 3) insurers considering you for an insurance
policy or reviewing an existing policy;
4) government agencies reviewing your
financial status in connection with issuing you certain licenses or government
benefits; 5) a state or local child support
enforcement agency for purposes of determining child support payments; and
6) anyone else with a legitimate business reason for needing the information
in connection with a business transaction that you initiate. Credit bureaus
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may also furnish reports in response
to a court order or a federal grand jury
subpoena. In addition, they will supply
the report to a third party if you give
them written instructions to do so.
WHAT TYPE OF INFORMATION IS
ON MY CREDIT REPORT?
There are usually four types of
information:
1. Identifying information: Your
full name, nicknames, current and
previous addresses, Social Security
number, year of birth, current and
previous employers, and, if applicable, your spouse’s name.
2. Credit information: The loan accounts you have with banks, retailers, credit card issuers, and other
lenders. This information includes
the type of loan (mortgage, student loan, revolving credit), the
date you opened the account, the
original loan amount or credit limit
(for credit cards and other lines of
credit), the current balance, any
cosigners of the loan, and your
payment pattern over the past two
years. Other accounts you maintain
that do not involve credit, such as
a checking account or your account
with a local utility, are not included
because credit reports are limited to loans. However, if you are
delinquent in paying any account,
including a noncredit account (e.g.,
a utility bill), and the account is
referred to a debt collector, the debt
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collector can report your delinquency to the credit bureau, and it
will remain in your credit report for
seven years.
3. Public record information: Federal
and state court public records on
bankruptcies, tax liens, or monetary
judgments. (Some credit bureaus
list nonmonetary judgments as
well.)
4. Inquiries: Every instance in the
past two years when you applied
for credit and the creditor reviewed
your credit report or score; this
is known as a “hard” inquiry. If
you obtain a copy of your report
or score, or if an existing creditor
obtains your report as part of its
regular review of existing accounts,
it is considered a “soft” inquiry. For
purposes of your credit score, only
hard inquiries affect your score; soft
inquiries are not considered.
WHERE DO THE CREDIT BUREAUS
GET THEIR INFORMATION?
Most lenders furnish information to the
credit bureaus about your credit accounts. This occurs not only when you
first apply for credit but also after an
account is opened. Each month, your
creditors update the bureaus about the
information in your account, including the amount of your last payment,
whether it was late, the remaining balance on your account, and, for accounts
with credit limits, the amount of your
limit. Most creditors send information
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to all three national credit bureaus.
Some creditors provide information to
only one bureau.
DO THE CREDIT BUREAUS MAKE
THE DECISION WHETHER TO
GRANT ME CREDIT?
No. The credit bureaus only supply the
information about your credit history.
It is the lenders themselves who make
the decision whether to grant you
credit.
WHY SHOULD I OBTAIN A COPY
OF MY CREDIT REPORT?
Not knowing what’s in your credit
report can hurt you. Credit decisions,
and in some cases employment and
insurance decisions, are based, in part,
on information in your credit report.
Therefore, it is important that you
periodically review the information in
your credit report to ensure that all the
information is accurate. For example, if
a creditor incorrectly reported that you
made a late payment on your credit
card, you can file a dispute to have the
error fixed. It is especially important to
review your credit report before you
apply for credit so that you can correct any inaccurate information. Also,
for large loans, like home mortgages,
lenders sometimes ask borrowers questions about information in their credit
reports. By examining your report
before you apply for a loan, you can be
prepared to answer any questions that
may arise while your application is being reviewed.

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Finally, checking your report periodically can help protect you against
identity theft. If someone applies for
credit using your name and credentials,
a record of the transaction will appear
in your credit report. If you review
your report and see any credit inquiries or new accounts that you do not
recognize, identity theft may have occurred; therefore, you will want to take
appropriate action immediately. For
more information about detecting and
responding to identity theft, visit the
Federal Trade Commission’s identity
theft website at www.identifytheft.gov.
WHAT SHOULD I DO IF I FIND AN
ERROR ON MY CREDIT REPORT?
First, you should file a written dispute
directly with the creditor that reported
the error to the credit bureau. Your
credit report will provide the creditor’s address for purposes of mailing a
dispute. Include copies (not originals)
of any documentation that supports
your position. For example, if a creditor reports that you made a late payment when you made the payment on
time, you should include a copy of a
canceled check showing your payment
was received on time or a copy of your
bank statement showing the date you
made the payment electronically. You
can call the creditor to find out what
information is needed to refute the
creditor’s claim. Under the Fair Credit
Reporting Act, the creditor is required
to investigate your complaint. If the
creditor agrees that it reported incorrect
information to the credit bureaus, the
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creditor must send corrected information to all the credit bureaus that were
given the incorrect information.
Instead of filing a dispute directly with
the creditor, you also have the option
of notifying the credit bureau(s) that
included the incorrect information in
your credit report. The credit bureau
will then conduct an investigation and
notify you of its findings. If the bureau
cannot confirm the information that you
are disputing, it will be removed from
your file and a corrected report will be
sent to any parties you specify that have
received your report within the past
six months (or within two years if the
report was requested for employment
purposes). If you find an error on a report from one credit bureau, you should
request a copy of your report from the
other two bureaus because the error was
most likely reported to all of the credit
bureaus. If the other bureaus are also issuing incorrect information, you should
file a dispute with them as well.
WHAT IF THE CREDIT BUREAU
STANDS BY ITS REPORT?
You have the right to present your side
of the story in a brief statement, which
the credit bureau must attach to your
credit file. Anyone requesting a copy
of your credit report would also automatically receive your statement (or a
summary of it) unless the credit bureau
deems the dispute irrelevant or frivolous.

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WHAT SHOULD I DO IF I AM
DENIED CREDIT BECAUSE OF
SOMETHING IN MY CREDIT
REPORT?
The lender denying you credit must
explain the reason for the denial and
provide you with a notice listing the
name, address, and telephone number
of the credit bureau that provided the
credit report. At that point, you have up
to 60 days to request a free report. If the
creditor relied on your credit score in
making the decision to deny you credit,
it must disclose the score in the notice.
HOW LONG DOES INFORMATION
STAY ON MY CREDIT REPORT?
Generally, the credit bureaus must automatically delete negative information
(e.g., a late mortgage payment or a tax
lien) that is more than seven years old
from your report and any bankruptcies
that are more than 10 years old. For tax
liens, the seven-year period does not
start until after the lien is paid. However, there are exceptions. Negative
information that is more than seven
years old can be reported in the following cases: for a Perkins student loan; for
credit transactions involving a principal amount of $150,000 or more; for the
underwriting of life insurance involving a principal amount of $150,000 or
more; and for employment of an individual with an annual salary of $75,000
or more.

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HOW DO I GET A COPY OF MY
CREDIT REPORT?
Under federal law, you are entitled to
receive a free copy of your credit report
from each of the three national bureaus
(Equifax, Experian, and TransUnion)
once a year. To obtain a free copy of your
credit report from one or all three of
the national credit bureaus, visit www.
annualcreditreport.com or call 1-877-3228228. To request your report(s) through
the mail, visit www.annualcreditreport.
com/manualRequestForm.action,
download the form, print it, fill it out,
and then mail it to:
Annual Credit Report
Request Service
P.O. Box 105281
Atlanta, GA 30348-5281
Here is the contact information for the
three national credit bureaus:
Equifax
P.O. Box 740241
Atlanta, GA 30374
1-800-685-1111
www.equifax.com
Experian
P.O. Box 2104
Allen, TX 75013-2104
1-888-397-3742
www.experian.com
TransUnion
P.O. Box 1000
Chester, PA 19022
1-800-888-4213
www.transunion.com
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FOR MORE INFORMATION
The Federal Reserve Bank of
Philadelphia has other brochures on
credit topics.
To obtain copies of these brochures, or
for additional copies of this one, please
contact:
Federal Reserve Bank of Philadelphia
Public Affairs – Publications
P.O. Box 66
Philadelphia, PA 19105-0066
215-574-6113
www.philadelphiafed.org

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Reserve Bank of Philadelphia,
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8/2015