Credit reports are generated by credit bureaus, companies that research information on consumers.
Credit bureaus do not operate as a public service information repository. They are for-profit organizations who are in business to make money by selling the information collected from various sources to creditor organizations such as banks, finance companies, and department stores.
There are many credit bureaus in the US, but only three major ones:
Where Do Credit Bureaus Get Information About You?
Credit bureaus compete for paying subscribers (creditors). Many (but not necessarily all) of the subscribers report their consumers’ payment histories to the credit bureau(s) who then enter the information into the consumer’s file and make the files and the information contained therein available to the subscribers.
Credit bureaus also cull information from public records such as court records of judgments, bankruptcy filings, dismissals and discharges, tax liens, wage garnishments, child support information, foreclosures, notices of default, and so on.
What Went Wrong?
Credit reports are not an inherently bad thing. Banks and other lending institutions must have a way to verify your creditworthiness. If they didn’t, credit would be very hard to come by. (Would you lend money to a total stranger about whom you knew nothing?)
BUT credit reports aren’t always accurate, and they don’t always tell the whole story. It is important to note that the credit bureaus do not verify the information they receive from their subscribers; they simply enter it. This means that the information they are recording may or may not be accurate. The information the credit bureaus receive from their subscribers is faithfully recorded regardless of whether it is inaccurate, incomplete, obsolete, or misleading.
Likewise, information garnered from public records may not be accurate or it may be obsolete, but it is still entered into your credit report.
The Effect of Wrong Information in Your Credit Report
If you are applying for credit to make a major purchase such as a house or a car, or if you are applying for a credit card or some other form of consumer loan, the creditor (the lender) will often order a report from one or more credit bureaus to examine your payment history. Inaccurate information in the credit report can have a serious detrimental effect on your ability to secure the loan you need.
An unfavorable credit report can also prevent you from renting an apartment or even opening a bank account.
Equally importantly, incorrect information in your credit report can affect your income. Many major corporations conduct credit checks before hiring a prospective job applicant. Negative items in your credit report can have a devastating impact on your ability to secure the job you want, particularly in today’s highly competitive job market.
It is of little comfort to know that if you have fallen victim to negative information in your credit report, you’re not alone. An estimated 75% of the population has had negative items lodged in one or all three of their major credit bureau reports.
What to Do About It
If you have an unfavorable credit report, you need to take action. The first thing you should do is to obtain your credit report from all three credit bureaus. It’s not enough to check a single credit bureau’s report because they don’t necessarily have the same subscribers and there could be different information in each of the bureau’s reports.
You are entitled to learn what is in your credit files, but the credit bureaus vary as to how they disclose this information. Most will send you a copy of your credit report. Some will ask you to visit the bureau to review your record or will give you information over the phone once you’ve provided them with the required identification such as name, address, social security number, spouse’s name, where you’ve lived for the past five years, and, in some states, your driver’s license number.
Once you have obtained your credit reports, you must review it to determine which items need to be removed or corrected. There are different methods by which this can be done – the dispute method, the substitute dispute method, the negotiation method, and the legal action method.
Removing or correcting inaccuracies is a good first step toward restoring your credit rating. There are other steps involved in the full establishment and re-establishment of your credit that we can help you with.
Effective credit and debt management is a complex, multi-layered specialty field. Experienced, expert help is available to you at The Manning Group, Credit & Debt Management. Call us at (888) 458-9100 or contact us online. Don’t leave good credit to chance – leave it to us!