If you're like many consumers, you probably have questions about what goes into your credit report and who uses it. Here is an overview that we hope will address many of your questions and concerns.
What is a credit report?
A credit report is a summary of your financial reliability—for the most part, your history of paying debts and other bills. It is prepared by credit bureaus (also known as credit reporting agencies) primarily for use by lenders, employers and others who, under the federal Fair Credit Reporting Act (FCRA), have a legitimate need for the information, such as when you apply for a loan, insurance policy, apartment or job. The wealth of information gathered by credit bureaus, coupled with the speed of today's computer systems, explains why consumers can quickly get loans and other services, including approvals of certain credit applications in minutes.
What is in my credit report?
In general, your credit report has four components:
-
Identifying information, such as your name, Social Security number, current and previous addresses, telephone number, birth date, and employer. This information helps ensure that your credit report is accurate and doesn't mistakenly include details about another person (perhaps someone with the same name).
-
Public record information, generally gathered from local courthouses, including bankruptcy records, foreclosures, tax liens, court-ordered payments, and late child-support payments. This information is used to determine if you have previous defaults or legal judgments against you. For example, a mortgage lender will want to know if you've had a past foreclosure before granting a home loan. Derogatory information can generally remain on your credit report for up to seven years, except for bankruptcy information, which may be reported for 10 years.
-
Other credit history information, such as a list of your credit cards and loans, and whether payments were on time. Here, too, negative information about your credit relationships, such as late payments or defaults, will remain on your report for up to seven years, and bankruptcy information may appear on your report for 10 years.
-
"Inquiries," a section of your report that lists the creditors, insurance companies or other parties that have requested your credit report, usually when considering an application you submitted. Inquiries typically can remain on your credit report for two years.
What is NOT in my credit report?
Your credit report typically does not contain information about your checking and savings account balances, brokerage accounts, medical history, race, sex, religion, national origin, or your driving record.
How do credit bureaus get their information?
According to David Lafleur, a Policy Analyst at the FDIC, "Lenders voluntarily supply the information to credit bureaus on an ongoing basis; no federal laws require companies to submit the data." Why? Because having access to current and reliable information about you helps lenders make informed decisions and offer you financial products and services very quickly. Lenders, landlords and other users of credit reports also may want to know about events such as lawsuits and bankruptcies, so credit bureaus obtain this information from courthouses and public records.
Can anyone get my credit report?
No. The Fair Credit Reporting Act (FCRA) contains rules about who can get your credit report. Generally, a third party can access your credit report when considering an application you've made, such as for a loan, a job, insurance or an apartment. The law also allows entities to access your report as part of an ongoing business relationship. Suppose you already have an auto loan at the bank and you miss a payment or you move and don't provide a forwarding address. In this situation, the bank has the right to obtain a copy of your latest credit report.
But even if you are paying on a loan or credit card as agreed, the institution where you have the account can obtain your credit report as part of its regular maintenance of the account, and that includes looking for warning signs that you may have problems fulfilling your obligations in the future. "For example, it is not uncommon for credit card issuers to review their cardholders' credit reports on a regular basis and raise their APR (annual percentage rate) or lower their credit limit if there are signs of trouble, even if someone has been diligently paying the card issuer," says FDIC Consumer Affairs Specialist Howard Herman.
An exception to the ongoing relationship would be for employers who would first need to obtain the employee's permission each time before requesting a credit report.
