What are credit reports?

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A credit report is a record of the debts, borrowing record and repayment histories of an individual or business.

The credit report is produced from databases compiled, organized, managed and marketed by credit reporting agencies (CRAs), also called credit bureaus. These credit reporting agencies build their databases by collecting information from creditors, lenders or vendors, as well as by obtaining data from public records.

There are three main credit agencies for the U.S. consumer market: Equifax, Experian and TransUnion. A fourth, much smaller consumer credit agency is Innovis. Other consumer credit reporting agencies that store consumer data include the LexisNexis, Telecheck, Teletrack, Tenant Data Services, Insurance Services Office and the Medical Information Bureau.

Experian, Equifax and TransUnion also have smaller divisions that offer commercial credit reports on businesses. However, the most commonly known business CRA is Dun & Bradstreet.

Federal credit reporting regulations

Because of the impact that credit records and ratings have on the lives of U.S. citizens, the federal government has passed laws to govern CRA behavior and responsibilities, including the Fair Credit Reporting Act (FCRA) and the Fair and Accurate Credit Transactions Act (FACTA).

These regulations have resulted in many restrictions on how credit reporting agencies and creditors may operate, including the following:

  • Covered period. Negative consumer entries may only remain on the credit report for seven years (from the date of the delinquency). Judgments such as bankruptcies and foreclosures may remain on credit reports for up to 10 years, while tax liens and certain debts to the government remain for up to seven years – from the time they are finally paid.
  • Free credit report. The three primary consumer credit reporting agencies are required to provide each consumer with a free copy of his or her credit report every year. This report does not include the credit score, however.
  • Accuracy. When reporting to CRAs, lenders and creditors are obligated to provide accurate and thorough information files. If a consumer disputes a credit entry, the reporting lender or credit has 30 days to explain why information is correct – or the disputed entry must be removed from the report. If a removed negative is later added back to the report, the reporting creditor must notify the borrower.
  • Identity Theft. Credit reports may not include entries that have been identified as originating from identity theft.

Contrary to popular belief, credit reporting agencies rarely have the same exact data for individual consumers. Not all creditors and lenders report to credit bureaus. And among creditors that do report, many do not report to all three CRAs.

This is why many lenders will opt to pull credit reports (and FICO scores) from all three repositories.

Parts of a credit report

Consumer credit reports also contain both personal information and credit history. The consumer data included in credit reports include the following:

  • Full name and known aliases
  • Social security number
  • Date of birth
  • Current known address
  • Previous recorded address
  • Employment information (when available and recorded)

The credit history section of consumer credit reports provide several fields of recorded data for each credit account on file, including the following:

  • Recorded name of the creditor
  • Account number
  • Type of credit
  • Start date of account
  • Close or last activity date on account
  • Initial loan amount or maximum credit line
  • Current balance on account
  • Minimum required monthly payment
  • Late payments on accounts – including duration of late payment
  • Status of account
  • Relevant history from public records, including tax liens, bankruptcies and other judgments
  • Recent credit inquiries

As a borrower obtains a loan and makes payments, payment activity is reported to one, two, or all three of the credit bureaus.

Another business considering issuing credit to an applicant will review his or her credit report to evaluate the payment patterns of that potential customer. After reviewing the credit report, the creditor will decide whether or not to issue credit to the borrower.

If the business decides to issue credit, loan terms will be determined based partly on the information provided in the credit report.

When an individual’s application for credit is turned down because of information on the credit report, the applicant will receive a form called an adverse action report from the creditor. This adverse action report will identify the reason or reasons why the application for financing was not approved.

Credit reports have a significant impact on the lives of most Americans. Credit records affect the types of financing individuals can obtain, as well as the terms they may face if they are approved. Many businesses now also pull credit reports on prospective hires, especially for sensitive positions.

With so much on the line, credit history and scores are now an integral part of every person’s personal finance toolbox.

Disclaimer: NetCredit is a direct personal loan provider and does not provide financial advice, nor does it vouch for any vendor or service mentioned on our NetCredit personal finance blog or online consumer loan glossary. Always research and perform due diligence on any service provider or vendor before deciding to use them, and we recommend that you speak with a financial advisor regarding all decisions that will affect your finances.

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