It’s hard to be a smart consumer when you don’t know how credit reporting agencies collect and report your personal data.
It’s even harder to dispute the information on your credit reports if you don’t understand what these companies are doing with all of your personal information.
This guide will explain exactly who has access to your credit information, how you can see it for free, and dispute inaccurate data if needed.
2.1. Who Maintains Your Credit Information
By now, you should be getting familiar with the concept that credit scores are calculated using the information in your credit reports.
In this chapter, we’ll talk about who maintains your credit reports so you can access them and make sure what’s being reported about you is accurate.
Companies that maintain your credit files in the United States go by different names, such as Credit Reporting Agency (CRA), A Consumer Reporting Agency, A Credit Agency, or a Credit Bureau, but they are all the same.
You may also hear a credit report called consumer reports or credit files. Again, it’s all the same thing.
The three major credit agencies are Equifax, Experian, and TransUnion. And some lesser-known agencies include Innovis and PRBC.
For-profit companies gather your credit information and sell it to a variety of companies and individuals. They get most of the information they collect from your creditors, like demonstrating card issuers and lenders. Creditors supply information about accounts using a standard electronic reporting system.
Credit agencies also get info about you from the public records that exist where you live. That picks up data such as a lien or a bankruptcy in your name, for instance. Credit agencies turn around and sell the information they have collected to companies and individuals who want to use it to evaluate you.
These include banks, credit unions, mortgage lenders, credit card companies, department stores, car dealers, debt collectors, insurance companies, landlords, and employers. They can use the credit information to supplement applications for credit, insurance, housing, and employment.
Credit reporting agencies may also provide identifying info and credit reports to government agencies for their use and extending credit, reviewing the status of an account, or attempting to collect a debt, granting a license or other benefit, or investigating international terrorism.
Another point to remember about credit agencies is that their formation about you may not be the same. For instance, your credit card issuer may report your payment data to just TransUnion, but your mortgage may report it to TransUnion and Experian.
In other words, your credit scores depend on which credit report or reports are used. This confuses many people who mistakenly expect their credit reports to be identical from one credit agency to another.
And as I covered in a previous chapter, there are many different credit scoring models, each with its numerical scales and ways of evaluating your info differently. Hence, it’s not likely that any of your credit scores will match.
In the next chapter, I will tell you how to get your credit reports for free, so you can review them as often as you’d like.
2.2. How To Get Your Credit Data For Free
In this chapter, you’ll learn how to get your credit reports for free.
A US law called The Federal Fair Credit Reporting Act allows you to get your credit report from each of the three major nationwide credit bureaus, and we just covered those. They are Experian, Equifax, and TransUnion for free every 12 months at annualcreditreport.com.
The best strategy is to space them out, so you get a report from a different bureau every 4 months. Make a note on your calendar to visit the official site (annualcreditreport.com) on that timeline. Be sure to use that exact URL because many imposter sites with similar names are not legitimate.
When you get your credit reports, they will not include any credit scores. You’ll simply see your complete credit file, and I’ll explain what’s in it in the next chapter. In addition to using annualcreditreport.com, I recommend creating accounts at one or more free credit sites.
You’ll find a resource in this chapter in this chapter that includes links to many excellent free credit sites with a description of the services they offer. You don’t need to enroll in all of them, but you might choose a couple.
These free sites offer one or two of your credit reports for free such as just TransUnion of TransUnion and Equifax. Plus, some of them also offer one or more of your credit scores for free.
Most credit sites allow you to view your reports and scores as often as you’d like, which is a fantastic free service. However, in return, they display ads and email offers. You can simply ignore them or unsubscribe from promotions if you’d like.
No matter if your request your credit reports from annualcreditreport.com or a credit site, you’ll be prompted to enter some personal information such as your name, address, birth date, and Social Security number.
, However, if you’re not comfortable, in some cases, you may have the option to call and request a paper copy of your credit report mailed to you. When you’re online, you’ll also be asked a series of multiple-choice security questions to verify your identity.
They may include previous addresses, dates you took out an existing loan, or the monthly payment on a particular loan. If you get any of the answers wrong, you’ll be locked out for a period.
So, take the time to research what the correct answer is if you’re not sure. So, unless you want to see a specific score, such as your FICO score, there isn’t a need to pay for scores.
The only time I would recommend buying your credit score is when you’re preparing for a big loan application such as a mortgage. Most home lenders use the FICO score, so you’d want to review it at least a few months before applying for a home loan.
For example, you can get a FICO score that’s calculated on your data with Experian, Equifax, and TransUnion for about $60. Some credit cards offer a free FICO score, but it’s likely calculated on one credit agency such as TransUnion.
Use this resource to get one or more of your free credit reports and credit scores.
In the next chapter, I’ll walk you through what to look for when you’re reviewing your credit reports.
2.3. 6 Steps To Review Your Credit Reports
In this chapter, we’ll review the different types of information in your credit reports and six steps to review them properly.
Step #1- Verify Personal Information
First, you want to make sure that you recognize the information on your credit report, including your name, any former names, current and previous addresses, and your Social Security number.
You may also see the names of current or previous employers and your phone number.
Some of your personal information may be compiled from previous credit applications that you’ve completed.
Step #2- Verify Your Credit Accounts
The majority of your credit report consists of the details about your current and past credit accounts that you own or that list you as an authorized user.
They include the date the account was opened, the credit limit or original loan amount, payment terms, outstanding balance, and a history that shows if you paid the account on time.
If you’re reviewing your report for the first time, you might be surprised by how many accounts are there. If you have closed or paid off accounts that didn’t have any negative information like a late payment, those accounts stay in your file for 10 years.
So, don’t be alarmed if you see accounts with a ‘Closed’ status. And if you have any accounts with negative info, such as late payments or being in collections, those accounts only remain in your credit report for 7 years before they fall off.
So, verify if any old account shows up when they shouldn’t. For instance, if you had late payments on a personal loan but paid it off 8 years ago, it shouldn’t still be in your file because the 7-year period has ended.
If an account was transferred to a debt collector or maintained public records and Federal or another creditor, you might not see the original creditor’s name. Information on each account is reported separately so that you may see more than one tradeline for the same debt.
Just make sure the outstanding balance isn’t listed twice.
For example, if you have a compromised credit card and the issuer closed the account and sent you a card with a new number, your credit report usually shows both the old and new account.
Only the new account should have a balance. The old, closed account should be there but with a ‘0’ balance.
For revolving accounts, these are credit cards and lines of credit, be sure to review the credit limits for accuracy. And review the original amount of an installment loan such as a car loan.
Check your current balances but remember that the balance isn’t updated constantly. What you see is likely the amount you owed the previous month before you made the last payments.
And you must make sure that your payment history is correct. Did you always pay on time?
Or are there late payments? Also, check that your responsibilities on the account are correct such as individual owner, joint owner, or authorized user.
Step #3- Verify Any Accounts In Default
Some businesses such as utility companies, landlords, and insurers don’t report your payment information directly to credit agencies.
However, if you don’t pay them and turn your account over to a collector, the collection company will report your past-due account to one or more credit bureaus.
So, make sure that all the information you see is correct.
You can’t erase negative info from the credit information if it’s accurate. But don’t tolerate any negative data if it’s an error.
Step #4- Verify Public Records
Various public records are maintained by federal, state and local government agencies, accessible to any individual or business.
Credit agencies include negative public data about you, including bankruptcies, lawsuits, judgments, wage garnishments, liens, foreclosures, and child support delinquencies.
Check that you don’t have an inaccurate public date on your report.
Accurate negative info typically should not remain in your file for more than 7 years. However, some types, such as bankruptcy, may stay in your file for 10 years or longer.
Step #5- Review Inquiries
The final items on your credit report are called inquiries. These are the companies that have requested a copy of your report during the previous year or two. Credit Inquiries fall into two categories known as soft or hard.
Soft Inquiries only show up on the credit report you see, not in the report that a lender or a merchant sees.
Soft inquiries include checking your credit reports and companies checking your report for promotional purposes, such as whether you qualify for a credit card offer or a higher credit limit.
They may also check your current creditors and companies you’re doing business with that want to review your reports and check up on your financial situation.
Soft credit inquiries never affect your credit score, so don’t worry about these.
However, hard inquiries are those sent to prospective creditors because you applied for a new credit account. They will remain in your file for up to 2 years, and they do affect your credit scores.
So, make sure you don’t see any hard inquiries that you don’t recognize.
Step #6- Dispute Errors
The last step is to correct any errors by disputing them with the credit agencies and the business that reported the inaccurate information called the furnisher of the data.
Common errors to watch out for include having accounts that belong to another person who has the same name on your file, known as a mixed file.
In some cases, incorrect accounts result from being the victim of identity theft which must be cleared up immediately.
Most Americans have errors on their credit reports that drag down their credit scores without knowing about them. So, if you have not reviewed your credit reports yet, go ahead and do that now.
In the next chapter, we’ll cover the right ways to dispute any inaccurate information you may find, which can be an easy way to improve your scores.
2.4. Disputing Inaccurate Credit Information
Under the Fair Credit Reporting Act, you have the right to dispute all inaccurate or incomplete data on your credit reports.
In this chapter, you’ll learn how to correct any errors you find.
As you’ve learned in this guide, you have multiple credit reports because there are multiple credit agencies. As I previously mentioned, the largest in the United States are Experian, Equifax, and TransUnion.
Many creditors report data to just one or perhaps two agencies. So, if you see an error on just one report, it may or may not appear on the other reports, which is why you need to check all three bureaus.
If you find an error, you’ll need proper documentation to support your claim. For instance, if you see a late payment that you didn’t make, you’ll need to find information showing when payment was sent or when it cleared your bank account.
You can upload documents related to a dispute on the agency’s website or mail them in.
Send any correspondence by certified mail and mark ‘return receipt requested on it. So, you’ve got a record of the agency receiving it. Include your letter, supporting documents, and a copy of the credit report with the error marked.
Once the agency receives your dispute, it must open an investigation or delete or correct the items you dispute within 3 business days. If they delete data, they must notify you and copy the newly updated credit report within 5 days.
If the credit agency conducts an investigation, they must complete it within 45 days. They’ll contact any creditors who reported the information you dispute.
They’ll ask them to verify the information and then get back to you with the results. So, if you don’t hear back in about 6 weeks, follow up with the credit agency.
If you find out that your dispute was denied because the information is correct, there’s nothing you can do to change it.
But, if you have proof of an error that gets denied, contact the company that furnished the info by phone and send them a dispute letter with backup in writing.
If your dispute is successful and you believe that you were turned down for credit within the past 6 months due to the errors, ask the credit agency to notify creditors about the corrections.
Agencies are only required to do that if you request it and identify which companies to inform. The same is true if you believe you were turned down for employment within the past two years.
Once the process is complete, wait a few months and request your reports again to confirm that the corrections still appear on your reports with each credit agency.
Call the credit agency helplines to complain if it’s not cleared up or you still have complaints. You can also submit a complaint with the Consumer Financial Protection Bureau and with the Federal Trade Commission. You can also contact your State’s, Attorney General.
If the investigation does not resolve the dispute to your satisfaction, you have the right to file a statement about what occurred that stays in your credit file. The credit agencies are only required to provide a summary of your statement.
So, keeping it short is best. But it’s not a guarantee that a credit will read it.
If a company refuses to correct incorrect data that they reported about you to a credit agency, you may be allowed to take legal action.
In the next chapter, we’ll cover types of negative information that can appear in your credit reports and how long they stay there,
2.5. 8 Black Marks In Credit Reports
In this chapter, we’ll review 8 black marks that can appear in your credit reports and significantly hurt your credit scores.
It’s important to do everything in your power to keep negative information off your credit history in the first place.
But, if you do have any negative items, be aware of when they should fall off your credit reports and dispute them with the credit bureaus if they don’t.
Here are 8 black marks and the rules on how long they can remain in your credit files.
2.5.1. Delinquent Accounts
Any credit account you don’t pay in time, such as 30 days late on a credit card or an auto loan payment, causes a ‘late payment’ to be entered on your credit reports.
Every account with ‘late payments’ stays on your credit history for 7 years after the date you became delinquent, even if you catch up later on and pay the delinquent amount.
2.5.2. Delinquent Federal Student Loans
Most loans made or guaranteed by the US Government can report delinquencies for 7 years after your account was turned over to them.
One exception is a Perkins Student Loan, which may be reported longer than 7 years until it’s paid in full.
However, before a federal student loan can show up as ‘delinquent’ on your credit reports, the US Department of Education must first provide you with notice and describe your right to see the student loans record, dispute any inaccuracies, and enter into a repayment program.
2.5.3. Accounts In Collections
When you don’t pay a credit account for a certain period, the creditor can no longer count on your debt as potential future income.
So, after about 6 months of unsuccessful attempts to collect from you, they count it as a loss. This is known as ‘charging off a debt.
But creditors don’t give up on collection efforts. They turn past due accounts over to a collection agency who either buys your debt from them or is paid a cut of any collected amounts.
The original creditor reports to the credit agencies the date your account were ‘charged off’ or sent to collections with the date your delinquency began. It’s reported for 7.5 years from the original delinquency.
The two common types of bankruptcies for consumers are Chapter 7 and Chapter 13.
With Chapter 7, you don’t repay any debts included in the filing. This is the worst type of credit because they don’t receive any outstanding balance that is owed. It remains on your credit report for 10 years after the filing day.
With the Chapter 13 bankruptcy, you repay a portion of your debt through a repayment program that is less harmful to creditors. It stays on your report for 7 years.
2.5.5. Lawsuits or Judgements
Negative legal information typically remains in your credit reports for 7 years from when a lawsuit was filed or a judgment was entered against you.
2.5.6. Tax Liens
If you don’t pay taxes, having a tax lien filed against you by the authorities is serious. Unpaid tax liens can stay in your credit files indefinitely, but if you pay off a tax lien, it stays for 7 years after the payment date.
However, you may be able to have the IRS withdraw it, so it comes off sooner; if you’ve complied with all tax filings over the last 3 years and didn’t have any past-due taxes, you can request a withdrawal from the IRS.
2.5.7. Criminal Records
Any information about arrests or indictments may be recorded in your credit reports for 7 years, but criminal convictions may be reported indefinitely.
2.5.8. Overdue Child Support
Having a record of overdue child support may be noted on your credit file for 7 years.
In the next chapter, we’ll cover the type of personal and account information that you’ll not find in your credit reports and therefore have no positive or negative effect on your credit.
2.6. 10 Types of Data That Don’t Affect You
There’s a lot of information about you and your credit accounts in credit reports, but it’s also important to know what isn’t there.
Data that is not in your credit file can’t help or hurt your credit scores in any way. So, there’s no need to worry about or focus on them when building your credit.
This chapter will review 10 types of information that do not appear in your credit reports and, therefore, cannot affect your credit scores.
2.6.1. Demographic Data
In previous chapters, I’ve mentioned that some of your personal information is included with the nationwide credit agencies on your credit report. Including your name, current and past addresses, Social Security number and birth date.
However, your credit files never include your race, gender, marital status, education level, religion, or political party. That information cannot be factored into your credit scores or used against you or for you in any way.
You may be surprised that your income generally is not included in your credit reports. Earning less or having a change in your income sources does not affect your credit scores. However, it could be a stumbling block to getting new credit because, in addition to your credit score, your income expenses and job stability are considered by a lender.
If there is salary information on your credit report, it’s’ possible that a credit agency could have picked it up from an application you submitted for new credit.
But there’s no connection between how much you earn and your credit. Whether you’re employed, unemployed, receiving government assistance, or how much or little money you make, you can have excellent credit scores.
2.6.2. Medical History
If you have medical bills that have not been paid and got sold to a collector, the collection agency will report past due balances to the credit agencies. Still, no one can see the details of your medical bills, and none of your medical history is ever a part of your credit reports.
Sometimes, life or disability insurance companies may check your credit. They cannot get information about your health history, but they want to see if you have a history of paying your bills on time.
2.6.3. Bank Accounts
Your bank checking and savings accounts are not credit accounts because they contain your money; therefore, they are never listed in your credit report.
And using a debit card linked to your bank checking or savings account never helps you build credit. However, if you have a bank credit card, that will be listed in your credit reports.
2.6.4. Payments To Small Businesses
Bills that you pay to small companies or individuals for local services such as loan care, pest control, or rent typically don’t appear on your credit report.
The credit bureaus have strict requirements about who can report consumer information to them, and in many cases, it’s just not feasible for small businesses.
Many people believe that paying your rent on time improves your credit, but it generally doesn’t. Again, rent is not a credit account, and landlords generally don’t report payments to the credit agencies.
However, some credit agencies are trying to allow consumers to have their rental payment history included.
For instance, Experian has a rent bureau division that some large property development companies may be using. If you’re a renter, check your credit report to see if your payments are being reported.
If not, you can’t force a landlord to report your data. But, you can enroll in a rent reporting service such as RentTrack, PayLease, PayYourRent, ClearNow, rent payment, and Rentler.
These services charge a monthly fee to collect your rent payment, pay your landlord on your behalf and then report your transaction to one or more of the credit agencies.
If you’re building credit from scratch, it may be worth it to jump-start a history of positive data in your credit file.
Remember that if you neglect to pay your rent and your landlord turns you over to a debt collector, the collections agency can report your account to the credit agencies. So always make paying rent on time and avoiding late fees a high financial priority.
2.6.5. Insurance Policies
If you own a vehicle or have a home loan, you must have auto and homeowners’ insurance. Additionally, all renters should have renters’ insurance. You likely have other types of insurance as well, such as health, life, and disability.
None of these policies or your history of paying premiums is reported to the credit agencies.
2.6.6. Utilities and Services
Like payments to small businesses, rent and insurance payments, credit bureaus do not receive info about your power, water, cable, internet, cellphones, and other utility bills unless you forgo paying altogether and the debt goes to a collection agency.
Stay current with your utility and service bills to keep everything working, but don’t expect them to impact your credit scores positively.
And just to clarify, even though utilities and services companies may not report info about you directly to the credit bureaus, they can use your credit information when deciding whether to do business with you and how much to charge for deposits.
2.6.7. Very Old Credit Accounts
After a set period, your old credit accounts fall off your credit reports.
Those with all positive data remain for 10 years, as we previously covered. Most accounts with negative information such as late payments or being in collections remain in your credit reports for 7years after they have been paid off, closed, or canceled.
However, some types of negative legal information may stay for 10 years or longer.
2.6.8. Credit Denial
If you’ve been turned down for credit, you may worry that it hurts your credit scores, but your credit reports do not show whether an application for a loan or a credit card was approved or denied.
Aside from a slight and temporary ding for having a hard inquiry on your report, there is not an additional consequence for being denied credit.
3.6.9. Your Spouse’s Information
Your credit history and scores are never merged with someone else’s when you’re married.
If you have a spouse with bad credit, that could affect your ability to get a joint loan or credit card, but it cannot taint your own credit file.
3.6.10. Credit Scores
I want to reiterate that your credit scores are generated using the information on your credit reports, but they are not part of the report itself.
You can purchase credit scores directly from credit agencies or different credit sites, but they are never included in your credit reports.
Let’s complete this section by reviewing common types of credit accounts and bills that affect your credit. Your payments for the following are typically sent to one or more credit agencies.
- Home equity line of credit (HELOC)
- Auto loan
- Auto lease
- Federal student loan
- Private student loan
- Personal loan
- Credit card
- Gas or retail store credit card
- Bank line of credit
Suppose you’re not sure whether a particular is reporting your payment information to credit agencies. In that case, you could find out by reviewing your credit reports for free at annualcreditreport.com or other credit sites.
We’ve covered a lot about understanding your credit reports. Be sure to take the next quiz to review key points you should know after completing the chapters in this section of the guide.
Now that you know how your credit score is calculated, how to get a free report, and how to dispute wrong data, it’s time to move on to the next chapter: How to Build & Maintain Excellent Credit