Credit Card Guide
What Is A Credit Report?
A credit report is the history of a person's borrowing, financing activities including events like filing for bankruptcy, any collections on accounts, court hearings, and inquiries of credit. The report is a record of an individual's information that is maintained by the three major credit reporting agencies or bureaus in the United States – Experian, TransUnion, and Equifax.
This information on this record is sent by vendors and merchants across the country to the bureaus on a monthly basis. While the credit report is a file with information, it also collates into a credit score – a three digit number which denotes the particular individual's level of credit risk.
What Goes Into A Credit Report?
Typically, each report is an individual's report and therefore has his or her personal information like the name, address, employer, and social security number already listed on it. The information that is compiled into the credit report is arranged in four segments:
Merchant Trade Lines – These are typically the unsecured and secured types of credit that are made available to the person. This segment includes department store, airline, and other credit cards, auto loans and mortgages.
Collections – When a credit account is unpaid it is considered delinquent. This account appears on the credit report as a collections account. A bad check can also fall under this category. If the delinquent account is paid for later, the information still remains on the credit report.
Court Records – Any court judgments, liens, bankruptcies and divorce settlements fall under this category of information. Again, like the paid collections, any satisfied judgments remain on the credit report.
Inquiries – When a consumer seeks credit or when a creditor seeks information, an inquiry is generated by about the consumer's risk and willingness to pay off any debt. These inquiries show up on the credit report as “hard” (seeking credit) or “soft” (information for promotion, information for employers).
Other Important Facts
There is a certain time period for items to remain on the credit report. For example, most inquiries on a report remain for a period of approximately two years; any negative information like court judgments or collections can remain on a report for a maximum of seven years. Bankruptcies may take longer – anywhere between ten to thirteen years.
Every individual is entitled to receive a free copy for his or her credit report from the three credit reporting bureaus every year. One can order them online or write a letter to the offices of the three agencies, asking them for the free copy of their credit report that every individual is entitled to. Some websites falsely advertise free credit reports and automatically enroll unsuspecting people into their program which can cost money. Make sure that you check with the government for the actual website that offers all three credit bureau reports for free.
A credit score ranges from 300 -- the absolute lowest to about 850 -- the other end of the spectrum. The higher the credit score the greater the risk of giving a loan or credit to the individual. The credit score is also available with your credit report.
Checking your own credit report is not considered to be an inquiry and therefore cannot hurt your credit score. Ensure that you check your credit report once a year and report any discrepancies or errors that you may find on the report to all three credit bureaus. Each bureau conducts its own investigations and notifies you of the result.
After a month of reporting the errors, order copies of the credit reports from each bureau and go through each entry to see if the error was rectified. If not, write to the credit bureaus again and attach the original letter to the current one. Repeat the process until the error on your credit report is corrected.
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Credit Card FAQ
- Does Applying for a Credit Card Affect my Credit?
- How Can I Get a Refund on a Credit Card?
- How Do I Transfer a Credit Card Balance?
- What is the Difference between a Charge Card and a Credit Card?
- Can I Get a Credit Card Without a Job?
- More at: Credit Card FAQ