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?
A credit report is simply a financial resume, derived from the records of our accounts and other publicly-obtained information. A credit report also contains "above-the-line" identifying information-- name, address, previous address, Social Security Numbers, etc. Credit reports are also used to create credit scores-essentially a credit risk score is your detailed report summarized as one 3-digit number that predicts the odds you are a good risk.

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 Reports
Information on your bill paying habits (each account is sometimes called a "trade line") can be positive or negative. If you think of it like a student's report card then on-time payments are generally like an "A", slower payments like a "B"or a "C," a defaulted payment later paid like a "D", and payments never made are like an "F." Of course, it is more complicated. You may get more positive points for on-time payments to certain creditors than others; for example, a payment on a secured credit card (where you must maintain a deposit to qualify) may not count as positively as a payment on a "prime" credit card.

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 Can Look At Your Report?

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
A wide variety of specialty credit bureaus sell other forms of credit reports. For example, insurance bureaus such as C.L.U.E. sell products based on auto and homeowners insurance claims history, the MIB sells medical insurance claims history reports, Chexsystems, Certegy and Telecheck all sell various check verification products. A variety of other specialty bureaus exist including tenants screening bureaus and workers compensation claims 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.

Insurance History:

CLUE Auto History: 866-312-8076

CLUE Homeowners' History: 866-312-8076

Employment History:

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:

Accufax: 800-256-8898

American Tenant Screen: 800-888-1287
Choicepoint Tenant History Reports: 877-448-5732

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:
By law, credit bureaus must keep your information accurate, which includes keeping it up-to-date. If your report says you have filed for bankruptcy when you have not, that is not accurate. If your report says you failed to pay a bill and were sued for nonpayment, but does not report that you paid the money later (if you did), then it is not up to date.

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.

• Your accurate information is missing. Small, local creditors may not report to national bureaus. Or, your report could be a partial or fragmented report -- with some of your accurate information linked to one version of your name and address and some of your information only linked to a different version.
• Information about someone else is included: You could be a victim of identity theft or you could be a victim of a merged file, where the credit bureau has someone else's information mixed up with yours-- usually, it's someone with bad credit.
• Accurate information is reported twice, which makes it seem as if you have too much credit for your income: Your mortgage or student loan may have been sold or serviced to another lender, but appears twice.
• Your on-time payments are reported late or other problems in reporting (errors by your lenders) result in inaccuracies.
• False public record information appears (bankruptcies, court judgments, etc.). Credit bureaus and their hirelings often inadequately match public records before adding the info to credit reports. Some other John Smith filed for bankruptcy-- but it wasn't you. False public records create the worst negative marks on your report-- much worse than occasional late payments.
• Your trade line is incomplete because a credit card company refuses to report your credit limit. This causes the credit scoring computers to presume your current or highest ever balance is your limit, making your ratio of used to available credit appear worse than it is, lowering your credit score. (You appear maxed out when you are not, on this account.) Why would a company deceive other companies this way? So that you appear to be a worse risk than you actually are, making it more likely that you will remain a captive customer of your current company and less likely to be offered the credit you deserve.

Credit Scores
Credit scores are mathematical summaries derived from credit reports. While PIRG believes they should be disclosed for free, federal law makes them separate from credit reports. Nothing prevents a creditor or mortgage broker from showing you your report for free, but the new federal FACTA amendments to the FCRA law allows credit bureaus to impose a "reasonable" charge. Some of the bureaus will sell the same credit score used by mortgage companies, known as the FICO score developed by the Fair Isaac company. Other bureaus will sell a generic score.

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.

WASHPIRG Fact Sheet on credit scoring. More information from our partners at the Center for Economic Justice. Watch for further updates to this section.

What To Do If The Credit Bureau Won't Help:

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.