The Fair Credit Reporting Act gives the guidelines on what credit reporting agencies can and can’t do regarding consumer’s credit reports. The credit reporting agencies are regulated by the Federal Trade Commission (FTC). Any complaints you have against a credit reporting agency should be directed to the FTC.
Understanding your credit reports can be a problem. With three major credit reporting agencies holding information on more than 160 million Americans, errors can happen. The information that is stored in the credit bureaus is information that the creditors report to the bureaus.
Many individuals are afraid to see what is on their credit reports, but fear should never stop you from requesting your reports. Lack of knowledge on what is being reported about you can cause you embarrassment or shock when applying for credit. Even if you feel your credit is immaculate, be sure of what your credit report says about you.
According to Credit Zeal, Approximately 70 percent of the individuals who request credit reports will find some inaccuracies being reported. The key is understanding your credit report and knowing what you can do about problem entries.
Files are often crossed if you are a Sr., Jr., I, II, III, or if you have a common name such as John Smith.
Individuals have had accounts opened in their names without their knowledge. Credit fraud is not uncommon. All three of the credit reporting agencies, Experian (formerly TRW), Trans Union, and Equifax, have special programs on their computers that can show how many times your Social Security number and address has had inquiries. If it is in excess, someone may be trying to use your identification to get credit.
By requesting your credit report at least once a year (preferably every six months) from the three reporting agencies, you can know of any problems being reported and solve them before you request new credit.
Once you receive a copy of your credit report, review every entry, including your name, address, and Social Security number.
Understanding your credit report can be confusing. Experian (TRW) has made its reports easy for consumers to read. Each entry is numbered. A dash before and after the numbered entry indicates a negative entry.
Trans Union has put all the negative entries of your credit report on the first portion of your credit report. The negative entries have brackets (<>.) around the creditors’ names.
Equifax will code its entries for payment history by numbers 1 through 9. A number 1 is good; anything above that is negative. Carefully examine every entry to make sure it is correct.
You can receive your credit report from the following agencies from https://www.annualcreditreport.com/.
Common Questions Regarding Your Credit Report
Q. I paid off a bank loan for less than the amount owed. The bank agreed to this and listed my account as settled on my credit report. What does this mean? Would another credit grantor view this as a negative entry?
Any time you pay off a debt for less than the amount due, the creditor will report to the credit bureau that the account was settled. The entry “settled” means that the account was paid off for less than the amount actually owed. This entry could be viewed as a negative entry by another creditor considering your application for credit. They would see that you did not pay your obligation according to the original terms of your contract.
When you are negotiating with a creditor and offering to settle your account for less than the amount due, make it part of the settlement that the creditor reports the account as paid in full to all credit bureaus. If it agrees to do this, get it in writing before you make the final payment. Trying to go back after you have paid the account and get the creditor to change the “settled” entry could be difficult.
Q. This year we are trying to get out of debt. We paid many of our accounts off and cut up the cards. They are still on our credit report. Why?
Congratulations for trying to get out of debt. You must realize however that most of the creditors you have been paying are probably subscribers to Experian (TRW), Trans Union, and Equifax.
The Fair Credit Reporting Act allows credit entries—good or bad—to stay on your credit report for up to seven years from the last date of activity.
Negative entries would be slow paying account, delinquent accounts, charge collection accounts, judgments, tax liens, or foreclosures. Bankruptcies can remain on your credit report for up to ten years from the date they were filed or discharged.
When you cut up your credit cards, be sure to mail them back—certified mail with a return receipt—to the creditor with a letter cancelling your account. If you do not do this, the account will show that it is still active. Approximately three weeks after you send back your cut-up cards, request a copy of your credit reports to make sure the creditor has indicated that the account is closed.
Q. There are inquiries listed on my credit report that I never authorized. Where did they come from?
Anytime you apply for credit, the application you complete has in small print above your signature a statement authorizing the creditor to review your credit report and to exchange information about you with the credit reporting bureaus and other creditors. When you sign this application, you give the creditor authorization to make an inquiry to the credit reporting agencies about you and your paying habits.
When the inquiry is made by the creditor, the credit reporting agency must indicate on the credit report the date and name of the creditor making the inquiry. Any authorization for an inquiry to be made about you must be in writing.
Whenever you are shopping for credit for a car, bank loan, line of credit, etc., never give your name and Social Security number to just any one. Many unscrupulous companies will run a credit report on you without your knowledge using just your name and Social Security number.
If you find inquiries made on your credit report that you never authorized in writing, contact the company that made the inquiry and request they remove it from your credit report. Ask the creditors where they got the authorization to run your report. If an authorization can’t be verified, contact the credit reporting agency and demand that the information be removed.
Remember, however, the companies you have previously authorized and now have credit established with can make any number of inquiries on you at any time. They periodically will do this when reviewing your line of credit for a renewal.
Q. There are accounts on my credit report that I never use. They are still being reported. I don’t want them to be on my report. What can I do?
A creditor can report your account whether good or bad to a credit re porting agency for up to seven years from the date of the last activity. Most people do not realize that once they have paid their credit card accounts off and do not intend to reuse the credit card, they must cut up the card and mail it back to the creditor with a letter indicating they want the account cancelled.
If the card is not sent back with a letter to cancel the account the creditor has no way of knowing that you do not intend to use the line of credit in the future.
Open lines of credit that may be on your credit report could hurt your chances of qualifying for new credit. Always cancel unused lines of credit unless you intend to use them in the future.
Q. My employer’s name is on my credit report. Does that mean that my employer can check my credit report without my knowledge?
An employer can’t check your credit report unless you have signed an authorization. When applying for employment, many employment applications will have a statement indicating that the employer can verify your credit report.
Most people overlook the statement on the employment application authorizing the employer to verify their credit reports. With your signature on the application, the employer can do a background check about you which would consist of running your credit report.
Individuals working for insurance companies, banks, investment companies (such as stockbrokers), or any job where you would handle other people’s money would require a background check. If an inquiry was made, you would see it on your credit report. It would show the date and Company who ran the report.
Occasionally your current employer will periodically run your credit report to update its files.
Q. My business failed and I had to file for bankruptcy. I had some judgments filed against me. Now everything is on my credit report. Why are these public notices on my credit report? How long does it take to come off?
Any person can go to the county recorder’s office and pick up information about an individual who has any document recorded in his or her name. This applies to judgments, bankruptcies, tax liens, mechanics’ liens, and property owned. A judgment will be picked up by the credit reporting agencies from the county recorder’s office.
A judgment can remain on your credit report for up to seven years from the date it was entered by the court. A judgment is a public record and can also be picked up by a title company when you are trying to purchase, sell, or refinance your home. If you have sold your home or are refinancing, unless the judgments or liens were discharged through the bankruptcy, you will have to pay them off through escrow to deliver clear title.
If you have an unpaid judgment against you, most creditors will deny an approval of credit. The reason is that the party who has secured a judgment against you can secure it against your property, have your wages garnished, or levy your bank account to collect the amount owed.
Even if the judgment drops off your credit report prior to the seven years, it still remains in force. In some states, judgments expire after ten years; however, they can be renewed for an additional ten years. If the judgment is renewed, it should not be counted as a new negative on your credit report.
A bankruptcy is also a public notice and can remain on your credit report for up to ten years. It doesn’t matter whether it is a Chapter 7 or Chapter 13 bankruptcy—the common personal bankruptcies. The ten years begins from the filing date of the bankruptcy.
Tax or mechanics’ liens can remain on your credit report for up to seven years from the date recorded.
Any public notice not reported on your credit report still would show up if any type of background check was done on you. Just because a public notice is not mentioned in your credit report does not mean you don’t owe it. When you pay off any type of lien or judgment, make sure it is recorded as paid or released so your record is current and correct.
Q. What does a “charge-off, profit and loss” mean on my credit report? Do I still have to pay the account off if it is written off?
Usually a credit card account is charged off when the account becomes at least six months delinquent. The creditor has determined that there is no hope of collecting the money owed. A charge-off is an accounting practice for the creditor, but it will result in a negative credit item on your credit report.
Frequently, when an original creditor charges off an account, the creditor will hire a collection agency in an attempt to collect the debt.
If an account is charged off, the bank could come back and issue you a 1099-C tax form that would require you to report the debt as income. You would then be taxed on it unless you have filed for personal bankruptcy or can prove that you were insolvent when you stopped making your payments.
Q. How long does negative information remain on a credit report?
The Fair Credit Reporting Act allows a bankruptcy to remain on your credit report for up to ten years from the filing date. All other accounts— judgments, liens, charge-offs, slow pays, delinquent accounts, foreclosure and so on—can remain for up to seven years from the date of the last activity.
Many people get confused when reviewing their credit report. The confusion is between the date the credit was issued and the date of last activity. The date the credit was issued is irrelevant to removing the entry.
Removal is determined only by the date of the last activity or the last date a payment was received.
Good credit is treated the same way. If your account has been paid off and it has been seven years with no activity, the good account also will be deleted from your credit report. This is a frustration with people who have had past problems and the good credit is removed. Knowing how the system is set up enables you to keep a good record active and on your credit report.
