Credit Bureaus

Credit Bureaus: What you should know about Equifax, Experian and Trans Union Credit Bureaus A credit bureau is an entity that gathers information about consumers’ credit histories. They are nothing more than record keepers paid to store the information.  The Credit Bureaus are not as concerned as you if the information they have is correct or not.  Credit bureaus obtain identification and credit information from credit grantors, such as banks, retailers, and collection agencies. Bureaus obtain monetary-related public record information directly from the court systems. Depending on the source of your statistics, estimates of credit bureaus errors run as high 90%. – The Attorney General of New York State has estimated that credit bureau errors are in at least one-third of all reports. – The United States Congress has estimated  that errors exist in at least one-half of all reports. – A Consumers Union study found errors in 40% of credit files. The Charles Givens Organization conducted a study in  which 90% of the credit reports reviewed contained errors. The LAW is on YOUR side to correct, update, amend your credit report. Congress passed The Fair Credit Reporting Act (FCRA). This act passed by Congress gives you the consumer, the right to challenge the accuracy, the right to correct, update and amend your credit report any time.  Federal Laws require that the Credit Bureaus must reinvestigate anything you challenge without a charge. If the Credit Bureaus are unable to verify your dispute, the law says it must be removed from your file.

What is a Credit Rating?

Credit rating is different from a credit report, though it is the whole of a person’s credit report that makes up a person’s credit rating. A credit rating, also known as a credit score, or a FICO (Fair, Isaac and Co.) score, is a carefully calculated number that represents your credit history and therefore your credit risk to lenders.

A credit rating is a number between 300 and 800 on the FICO scale, named for the company who devised the system in the late 1950’s. When a person’s credit history is entered into a database, most commonly the TRIADä system database, and then compared to the borrowing habits of the general population, a score is generated.  These scores fall into three different categories, the first of which is a score of 660 or above. A person with a score of 660 or above generally has nothing to worry about and is almost assured of being approved for the loan, mortgage, credit card etc. Many people fall into the second set of scores, the middle category, between 620 and 660. Borrowers in this category do not have “perfect” credit, therefore are not assured of loan approval, and may be required to explain past credit mistakes, late payments etc., to ease the minds of the lenders. 

The final category is a FICO score below 620. Though it may be difficult for a person with this credit rating to obtain a loan or mortgage, the possibility is not completely out of the question. There are many loan companies who specialize in high-risk loans, though they may require a higher down payment, or lend money at a higher rate of interest. 

Though an individual’s credit rating is generally the most heavily weighed item that lenders take into consideration when determining a person’s credit risk factor, there are other items they also evaluate. Issues such as how often one has moved or how long one has lived at their current address; how much money is being barrowed; percentage of income the barrowed money represents and other monthly bills are compared to a credit rating to help a lender decide if a person will be likely to repay a loan. 

A final issue that may affect one’s ability to qualify for a loan or credit card: when considering availability of credit, banks and credit card companies pay special attention to past credit card bills, and likewise, auto loan companies look closely at previous auto loans. So, if you’ve always paid your auto loan on time, but sometimes “forget” about those credit card bills that pile up in your mailbox, you may want to think twice about applying for another credit card… 

If you are curious as to what your credit rating is, there are services that will help you obtain your credit score. We recommend obtaining your credit rating accurately.