* Credit Reporting Agencies
* Credit File Information
* Obtaining a Credit Report
* Disagreeing with Credit File Information
* Credit File Confidentiality
* Credit Repair Companies
* Tips to Remember - Rebuilding a Credit File
How you use credit and pay bills can affect your ability to obtain
additional credit in the future. If you are considering applying for
credit, have been denied credit, or just want to know what credit
information is given to any inquirers, your first step is to contact a
credit reporting agency (CRA), also known as a credit bureau.
This pamphlet explains the purpose of a credit reporting agency, the
steps to take to obtain information in your credit file and other facts
on how credit information from a CRA may be used.
Credit Reporting Agencies
Credit reporting agencies (CRA) or credit bureaus, are companies that
gather detailed information on how consumers use credit, and sell this
information to credit-granting companies such as banks, retailers or
credit card companies. Credit-granting businesses regularly supply (often
monthly) their credit experience with an individual to CRAs.
There are three major CRAs: Equifax, TRW, and Trans Union.
All of the information received from credit-granting companies is usually
assembled in a standardized, automated format called a credit report.
While the CRA does not grant credit, the information from your credit
file helps other businesses decide if you are a good credit risk.
A CRA charges inquirers for its credit information. Credit-granting
businesses subscribe to a CRA by paying a flat monthly fee and an
individual fee for each credit report they receive. Your credit file
should be available only to those companies who have a legitimate
business need for the information. In addition to credit-granting
companies, potential employers, landlords, or insurance underwriters, may
ask for information from your credit file.
Credit File Information
The CRA includes the following information in your credit file:
* General identification information that includes your social
security number, address, and marital status.
* Employer's name and address, and your estimated income.
* Payment history that includes the names of your creditors, how much
and what kind of credit you are using (installment, open-end, revolving),
and how you are repaying or have repaid the credit (payments on time or
late, delinquent balance).
* Inquirers of your credit file, such as the names of credit-granting
businesses who have requested your credit history in the last six months,
and employers who have requested your report for employment purposes in
the last two years.
* Public record information that includes any bankruptcies,
foreclosures, and tax liens.
There is a time limit for reporting negative information in your
credit file. According to the federal Fair Credit Reporting Act (FCRA),
delinquent payments can be reported for no more than seven years;
personal bankruptcies for no more than ten years.
Obtaining a Credit Report
The FCRA also allows you to review information in your credit file at the
credit reporting agency. If you have been denied credit based on
information in your credit report, the credit grantor must advise you of
that fact, and provide you with the name and address of the credit
reporting agency making the report.
When you receive the credit grantor's response, you may then send a copy
of this letter to your local credit reporting agency and request
information in your credit file, at no cost to you, within 30 days.
If you have been denied credit and you request your credit report from
one of the three major credit reporting agencies, you may want to request
copies of your credit file from the other two major CRAs. Obtaining
copies of your credit file from all CRAs will help prevent inaccurate
reporting. You may also write the CRA and request an appointment to
review your credit report.
If you have not been denied credit, but simply want to know what
information is in your credit file, you may write or call the credit
reporting agency. The CRA will usually ask you for identifying
information, such as current address and social security number, before
it releases the credit information.
A fee ranging from $2-$20 may be charged for the credit report. In some
instances there may not be a charge for the report. Again, because there
may be more than one CRA in your area that maintains a credit file on
you, you may also want to contact the other CRAs for all available
To find the address and telephone number of a CRA check the yellow pages
Disagreeing with Credit File Information
After receiving and reviewing your credit file, you may find information
with which you do not agree. If this happens you may write the credit
reporting agency, requesting it to check and verify any information you
The CRA is required by the Fair Credit Reporting Act to check the claim
within a "reasonable period," usually 30 days. If the disputed item is
wrong, the CRA must correct it. If the CRA cannot verify the disputed
item, it must delete the item.
An item might be deleted if the CRA asked the credit-granting business to
check the disputed claim but did not receive a response within a
reasonable time. Later, however, if the CRA finds that it did report the
deleted item correctly, this item may again be reported. Generally, the
CRA will advise you of whatever action it takes regarding the disputed
If a correction is made, the CRA will send, at your request, a notice of
the correction to any creditor who has checked your credit file in the
past six months. If you question an item in your credit file that the CRA
has told you it will not change, you may send a 100 word, or less,
comment explaining your side of the story, which the CRA is required by
federal law to send to any future inquirers.
Credit File Confidentiality
Because confidentiality of your credit file is required by the FCRA, the
federal government takes a strong position in ensuring that companies who
request information from your credit file keep the information
In one case, for example, the Federal Trade Commission (FTC), which
oversees the FCRA, charged one of the major credit reporting agencies
with the unauthorized use of credit files to create pre-screened mailing,
or telemarketing lists, without a subsequent offer of credit to every
person whose name appeared on the list.
In another case, the FTC charged a company, that purchased consumer
credit information and resold it to others, with failing to insure that
purchasers of this information had legally permissible purposes for
obtaining credit information. According to the Commission, the FCRA
requires credit bureaus to have reasonable procedures to ensure that only
those with permissible purposes obtain credit reports.
Credit Repair Companies
If you have been denied credit based on information found in your credit
file, you may be tempted by claims from credit repair companies promising
to "fix" your credit. These companies may charge large fees for their
service which allegedly will remove negative information from your credit
history. However, generally, you can do for free, or for only a few
dollars, anything a credit repair company can do.
Credit repair companies may rely on a section in the FCRA that ailows you
to request a CRA to check a disputed claim in your credit file. Because
the FCRA requires the CRA to check these claims in a reasonable period,
credit repair companies try to send so many verification letters to the
CRA that it cannot check the claims within a reasonable period and is
forced to delete the negative information.
However, many CRAs view reverification checks requested by credit repair
companies as "frivolous," which means they may not be required to
reinvestigate the disputed information.
Tips to Remember - Rebuilding a Credit File
In general, time is the only thing that will "fix" your credit report.
Information in your credit report will only be changed if items are
actually wrong, or beyond the seven (or ten) year reporting period,
required under federal law.
However, there are measures you can take to improve your chances for
receiving credit in the future, even if you have been denied credit and
find negative information in your credit file at the CRA.
* Catching up with payments -- There is no substitute for paying
bills on time. If you have received credit in the past but have made late
or delinquent payments, you may wish to contact your creditors directly
and request a reduced payment plan with them.
If your efforts are unsuccessful, you may want to contact a credit
counseling service, such as the nonprofit Consumer Credit Counseling
Service (CCCS), which has chapters in many cities. But, be careful who
you deal with. Some credit counseling organizations, even some that are
non-profit, may charge large fees and perform services of little or no
A reputable counseling service will work with you and your creditors
to establish a payment plan at a minimal extra cost to you, and help you
budget your money as well.
* Securing a credit card -- If you have negative information in your
credit file that prevents you from getting a traditional credit card, you
might consider obtaining a secured credit card.
Unlike traditional credit card accounts, a secured credit card
requires that you deposit money in a bank, savings and loan company, or
other financial institution which then becomes your line of credit. Your
money in the savings account is held by the bank.
Before considering this option, you should check for any processing
fees, the interest rate of the card, as well as what interest you will
receive from the savings account. If you pay your secured credit card
bills in a timely manner, you might consider applying for a traditional
credit card, after a year or so.
* Co-signing a loan -- If you cannot get a loan or other credit on
your own, you may want to ask a family member, or relative, who has a
good credit history to co-sign a loan with you. A co-signor accepts the
responsibility of repaying the loan, if you do not. As a result, you
become a better credit risk to the credit-granting company. Paying back
the loan on time may add more positive information to your credit file
with a CRA.
A Better Business Bureau Consumer Information Series Publication
Published by Council of Better Business Bureaus, Inc.
4200 Wilson Blvd., Arlington, VA 22203
Copyright 1995 by the Council of Better Business Bureaus, Inc.
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