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Credit Expert Bureau
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Back to School: Credit Reporting 101
This year, it's not just the kids who are heading back to school-TrueCredit is
giving you a session of Credit Reporting 101. We tackled Credit Scoring 101 in July; now let's take on the fundamentals of the credit reporting system. From the big three credit reporting agencies to your rights under the Fair Credit Reporting Act, this course will help you navigate the credit reporting maze.
The Credit Reporting Agencies - TransUnion, Equifax and Experian (formerly TRW) are the three national credit reporting agencies that keep records on consumers. The reporting agencies work with lenders, creditors, insurers and employers to update and distribute your information to the appropriate institutions. Here's an example of how the system works:
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When you apply for a new credit card the creditor requests a copy of your financial history from the reporting agencies.
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The creditor uses your
credit reports and scores along with income and debt information to determine what rates to offer.
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You start to use the new credit card and the creditor reports your activities to the credit reporting agencies every 30 days.
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The credit reporting agencies update your credit report as they receive new information from creditors or lenders.
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Your credit profile changes based on your financial activity. The next time you apply for a credit card or loan, the process repeats.
Your Credit
Report - Your credit report is divided into six main sections: consumer
information (address, birthday and employment), consumer statement,
account histories, public records, inquiries and creditor contacts. When
you open a new account, miss a payment or move, these sections are updated
with new information. The old records will stay on your credit report for
about 7 years. Not all creditors report to all three agencies and the
agencies don't share their data so your reports from TransUnion, Equifax
and Experian could be substantially different from each other. That's why
it's important to check your three credit reports every few months to
ensure that the information is accurate and up-to-date.
Correcting Inaccuracies - Under the Fair Credit Reporting Act, consumers
are protected from having inaccurate information on their credit reports.
If you find an inaccurate record on your report, try contacting the
creditor or lender associated with the mark first. These companies can
usually correct the mistake and send an update to the credit reporting
agencies. If you can't make progress this way, you can also dispute the
inaccuracy directly with the credit reporting agencies.
Working the System - Keeping your credit reports healthy will improve your
credit scores and help get you the best rates on major purchases. We
recommend that you check your credit reports every 3-6 months in order to
guard against damaging inaccuracies and identity fraud. Routine check-ups
along with paying your bills on time, keeping your credit card balances
below 35% of their limits and correcting any negative inaccuracies will
help you maintain a healthy credit profile.
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