Introduction: All About Credit Reports, Credit Scores and Credit Bureaus
The most valuable thing we have is our good name. The most common reflection of our reputation as a trustworthy consumer is our credit report, sold to businesses by a credit bureau. Mistakes in credit reports mean people pay too much for credit or are outright denied. Sloppy credit bureau and creditor practices also lead to identity theft. Because Congress is very concerned that credit reports be accurate and only shared with persons with legitimate rights to look at them, and that consumers have rights to correct them when they are inaccurate, it enacted the Fair Credit Reporting Act (FCRA) in 1970. In 1996, the FCRA was amended to improve credit report accuracy. In 2003, it was amended again by the Fair and Accurate Credit Transactions Act (FACT Act) to add several identity theft and accuracy provisions. However, consumer groups opposed passage of the FACT Act because it came at the unacceptable price of permanent limits on state authority to enact most stronger laws.
Credit reports and credit scores are now used in virtually every consumer transaction-whether to grant a credit card or car loan, open a bank account, obtain a mortgage or apartment lease, approve use of our debit or credit cards, get house or car insurance, cash a check or even obtain a job.
Unfortunately, the information contained in our credit reports, which are bought and sold daily to nearly anyone who requests and pays for them, does not always tell a true story.
Errors in credit reports lead to low credit scores. A June 2004 PIRG report Mistakes Do Happen: A Look at Credit Report Errors -- found serious mistakes in one quarter of all credit reports.
Low credit scores lead to you receiving high-priced sub-prime credit offers or even outright credit denial. Increasingly, credit scores are routinely being used to deny or non-renew insurance although some states are fighting this unfair trend.
Sloppy credit card and credit bureau practices lead to identity theft. Identity theft victims and error victims both face the nightmare on credit street: dealing with the credit bureaus, their failure to conduct fair reinvestigations in a timely manner nor correct errors, and, of course, the nightmare of their voice mail jails.
What Is A Credit Report?
Consumer reporting agencies (credit bureaus) sell your credit report and credit score to businesses that have "permissible purposes" to look at them. Your permission isn't generally needed except for employment purposes-- your application for credit, insurance, an apartment lease, or a bank account or other service gives the firm a "permissible purpose."
There are two types of credit report defined in the FCRA. An "investigative consumer report" is a credit report that is based on subjective interviews with employers, co-workers, neighbors or others and is most commonly used for employment or insurance investigations. Relatively fewer consumers will be the subject of investigative reports.
Most consumers will have a "consumer report." This is the report most commonly sold by the "Big 3" national credit bureaus (Equifax, Experian and Trans Union):
A "consumer report" is based on objective or factual (but not always accurate) information about your bill-paying habits (whether you pay your accounts on time or late and if late, how late) and any public record information related to your finances: whether any of your creditors have "charged-off" a debt, whether you've filed for bankruptcy, or have a lien, court judgments, or other public record against you.
Both Positive and Negative Information Is On
Information regarding public records, such as bankruptcies, lawsuit judgments and tax liens on the other hand, is always negative, almost always an "F." It is critical that these be corrected. If you had a tax lien or judgment against you, paying it off will improve that "F," provided it is reported correctly and, under the law, is "complete and up-to-date."
Debt collection accounts are always negative and are a source of many disputes and consumer complaints. Watch out for sleazy debt collectors "churning" or selling a debt among several entities in attempts to "restart" the seven year period it can be reported. A negative item's seven year reporting must begin within six months of the initial negative activity. If you receive a phone call from some new collector on some old loan, they may try to trick you into thinking that it can be reported an additional seven years unless you pay up. While they may have the legal right to try to get you to pay the old loan, it may not be in your interests to do so. Learn more about your debt collection rights with this FTC fact sheet. Find lawyers expert in the FCRA or debt collection laws here at the National Association of Consumer Advocates.
Also, if you have co-signed a friend's loan and your friend has failed to pay the loan and also filed for bankruptcy, it may be correct to list you, the co-signer, as not paying on a loan. But it would probably be incorrect to list anything about bankruptcy on your credit report. This is a common complaint.
|Who Reports To The Credit Bureaus?
Typically, large national credit card companies, student loan and auto finance companies regularly report to the Big Three. Positive credit information on debts paid to smaller or more local companies may not always appear on credit reports. However, the smaller companies will often report major negative information, such as loan defaults. The FTC is studying how to improve the coverage of these kinds of loans from smaller local companies, from utilities, from landlords and others. This might be helpful to improving credit scores of younger consumers or recent immigrants with fewer accounts on their reports. In general, more accounts or trade lines means each account counts less in score calculation and the impact of a negative item is diluted.
Access to your file is limited. A credit bureau may provide information about you only to people with a need (permissible purpose) recognized by the FCRA -- usually to consider an application with a creditor, insurer, employer, landlord, or other business. Only Vermont law requires your (oral) consent to access your report for credit or insurance purposes.
Your consent is required for reports that are provided to employers, or reports that contain medical information. A credit bureau may not give out information about you to your employer, or prospective employer, without your written consent. A credit bureau may not report medical information about you to creditors, insurers, or employers without your permission. An employer considering adverse action must show you the report.
Specialty Credit Bureaus
You have the right to obtain your credit for free annually on request from national specialty bureaus (if they have a report on you but, if you've never bounced a check, for example, the check bureaus will probably not have a report on you.) They are required to post a toll free telephone number. Of course, after any denial based on their reports, you also should be notified of the right to dispute your file.
Nationwide Specialty Credit Bureaus:
Consumers throughout the country can now get these specialty reports for free. The Federal Trade Commission has declined to publish a list of all national specialty credit bureaus, but we believe that the following companies meet the criteria. Let us know about other companies that should be added to this list.
CLUE Auto History: 866-312-8076
CLUE Homeowners' History: 866-312-8076
Choicepoint Employment Reports: 866-312-8075
Provides reports only if it provided your report to an employer.
ISO's A-Plus Auto and Property Databases: 1-800-709-8842
Residential Tenant History:
Provides reports if it provided your report to a landlord.
UD Registry: 818-785-3905
Toll free number not yet available at the time of publication.
National Tenant Network: 800-228-0989
Tenant Data Services: 800-228-1837
Tenant Screening Services: 800-388-2335
Check Writing History:
CheckRite: (800) 766-2748
Chexsystems: (800) 428-9623
CheckCenter/CrossCheck: (800) 843-0760
Certegy/Equifax: (800) 437-5120
International Check Services: (800) 526-5380
SCAN: (800) 262-7771
TeleCheck: (800) 710-9898
Medical Records or Payments:
Medical Information Bureau: 617-426-3660
Toll free number not yet available at the time of publication.
Your Rights When Information Is Inaccurate:
You have a right to dispute inaccurate or incomplete information in your report. You can contact the credit bureau. Also, under the new FACT Act, you can contact the creditor directly. Get more details about your rights from the FTC here. When you receive your report, you should by law also receive a fact sheet detailing all your rights.
Generally, negative information older than 7 years cannot be reported -- but the credit bureaus can retain it and report under a number of exceptions to this seven-year period. You cannot remove accurate negative information from your report. Only time can clear it up. The most important information in your report is the newest.
If the bureau refuses to make changes, you have the right to add a short dispute statement. These are of questionable benefit but you should do so anyway.
in credit reports include the following:
The hottest current credit scoring issue is this: "should credit scores be used to deny or non-renew car or homeowners' insurance?" At least twenty state legislatures and insurance commissioners are considering bans. Maryland, Hawaii, and California have laws with full or partial bans. Washington State has enacted extremely strict legislation. PIRG supports a prohibition, because credit scores are derived from error-ridden credit reports, no one has been allowed to see how the scores are calculated, and the policy may be discriminatory and violative of state insurance laws. The model state law supported by the state PIRGs to improve credit reporting includes a section banning the use of credit scores for insurance purposes.
You Subscribe To Credit Monitoring Services?
No. When you seek to obtain your free report by law, you will be offered the "opportunity" to instead purchase a credit monitoring service that allows you multiple copies of your report or perhaps other bells and whistles, such as email notification anytime there is a "ding" to your report. PIRG believes that federal law provides you with adequate opportunities to obtain your credit report for free. Don't pay extra for a credit monitoring service. We are disappointed that the credit bureaus use scare tactics to sell these products ("Your report could be full of mistakes!" "You could be a victim of identity theft!") even though their sloppy practices are the real problem that has led to the ID theft epidemic.
Complain. Send a short, precise written complaint to the Federal Trade Commission. Send a copy to your state Attorney General. Find his or her address here. If you believe that you have suffered damages (losses) as a result of the credit bureau's failure, you may want to contact an attorney. An initial consultation should be free. Ask the attorney what other charges there might be. Some cases are brought on contingency, meaning the attorney is only paid if you win. You can find attorneys expert in credit reporting and debt collection and other consumer problems at the National Association of Consumer Advocates.