The basics of credit reporting
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The Fair Credit Reporting Act
Credit reporting companies are governed by the
Fair Credit Reporting Act (FCRA) enacted in 1970,
revised effective October 1997, amended December
2003 by the Fair and Accurate Credit Transaction Act
(FACT Act)
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The benefits of credit reporting
 Credit reporting companies serve consumers
and businesses by making possible:
►
Instant credit
►
Lower-cost credit
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Nationwide credit
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Widespread availability
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Account management
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The three national credit reporting companies
 Experian
 Equifax
 Trans Union
There are some independent
local or regional credit bureaus
that provide direct consumer
assistance but whose data
resides with one of the national
credit reporting companies
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Requesting your personal report
Experian
1 888 397 3742
www.experian.com
Equifax
P.O. Box 740241
Atlanta, GA 30374-0241
1 800 685 1111
Trans Union
P.O. Box 1000
Chester, PA 19022
1 800 888 4213
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Sources of reports for consumers
 Consumer reporting companies
►
Referred by adverse action notices
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Fraud
►
Unemployed and seeking employment
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Receiving welfare assistance
►
Free reports under some state laws
►
Purchase additional reports
 FACT Act Centralized Source
 Consumer direct services
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Centralized source for free reports
www.annualcreditreport.com
 One every twelve months
 Single contact point
►
Telephone - 877 322 8228
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Mail
►
Internet
 Fee for credit score disclosure
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The credit cycle
You pay lender
Credit
reporting
companies
share
with new
lenders
Lender
updates
records
Lender shares history with
credit reporting companies
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Credit reporting companies are like libraries
Credit reporting company clients check out information …
… If they have a permissible purpose under the law
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The Fair Credit Reporting Act
Permissible purposes

Open or manage credit accounts

Offers of credit

Employment purposes

Underwrite insurance
 A business transaction initiated by the consumer

Court order or federal jury subpoena

Valuation of risk of an investor

Eligibility for government license

Disclosure to consumer
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The players in the credit cycle
 You
 Credit reporting companies
 Lenders
 Risk score modelers
 The government
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Information comes from you
Credit Application
Jonathan Q. Consumer
999-99-9990
10655 Birch St.
Burbank CA 91502
Information you provide in an
application for credit, housing, or
insurance is reported to credit
reporting companies
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Information comes from you
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What’s in a credit report?
 Identifying information
 Account information
 Public record information
 Inquiries
 Dispute instructions
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An important note about inquiries
 There are two different types of inquires:
►
Inquiries shown to potential creditors
►
Inquiries shown only to the consumer
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How long is information retained?
 Open accounts in good standing
 Closed accounts in good standing
Indefinitely
10 years
 Late or missed payments
7 years
 Collection accounts
7 years
 Civil judgments
7 years
 Chapter 7 bankruptcy
10 years
 Chapter 13 bankruptcy
7 years
 Unpaid tax liens
10 years
 Paid tax liens
7 years
 Credit inquiries
2 years
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What’s NOT in a credit report?
 Credit reporting companies do not store:
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Criminal background
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Medical information
►
Buying habits / transaction data
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Bank account information
►
Credit risk scores
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Initiating a dispute
 Must get report directly from Experian
►
►
►
Toll-free number on report gives you access
to customer service
Report number identifies you and your record
You and customer service representative
will be looking at the same information
in the same order
 Can dispute online, by telephone or by mail
 Dispute must be specific
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Processing a dispute
 Credit reporting company verifies with the source of the information (creditor
or court)
 Must allow up to 30 days for processing
 Source verifies, corrects or updates
 Secure electronic mail system is used
 Creditors required to report corrections
to all databases
 Consumer can add statement of dispute
if issue is not resolved with source
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Beware of credit repair companies
 Can’t legally do anything you can do for free
 Can’t legally collect fee before delivering the promised service
 Can’t legally advise you to lie about your accounts or about your identifying
information
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Common myths about credit reporting
 When paid, the bad debt will go away
 The credit reporting company denied me credit
 I’m not responsible for those charges on our account
 A divorce decree separates joint accounts
 Consumers must give their permission for a report to be issued (employment
is the exception)
 Requesting your own report and preapproved offers harm
your credit history
 There is only one credit risk score and it is on every report
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Automated credit risk scoring
 Used instead of a manual “score sheet”
 Valuable risk management tool
 Many different models available from many
different sources
 Credit reporting companies often apply the model
selected by the creditor when delivering the
credit report; however, the credit scoring model,
or formula, is proprietary to the developer and
is not known by the credit reporting company
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Risk factors are the key
 Generated when a risk score is calculated
 Tell the consumer what to address in their
credit history to become more creditworthy
 Are largely consistent from model to model
 Are usually included in or described
in an adverse action notice
 Experian provides both positive and
negative factors to consumers with
scores it provides through its
direct-to-consumer services
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Mortgage and auto loan inquiries
 Credit scoring systems recognize multiple
inquiries may be made for a single mortgage
or auto loan and adjust for that type activity
 For example, in many models inquiries
for those purposes are counted as a single
inquiry within any rolling 14-day period,
minimizing or eliminating any impact
on credit scores
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There is no silver bullet
 You can’t “fix” the number
 Address the risk factors in your
credit management and every
risk score will improve
 Time is the key
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Resources


Free annual FACT Act credit report
 www.AnnualCreditReport.com
Access to free report from each of the three credit reporting
companies
Experian

www.Experian.com credit education
Ask Max advice column, sample consumer report, frequently asked
questions

Experian Credit Educator: 877-901-6909
Personalized review and guidance about your credit report and score
by an Experian professional for a nominal fee.
www.FreeCreditScore.com
Access to credit monitoring and unlimited Experian credit reports and
scores
www.VantageScore.experian.com
Purchase a scored report and learn about scores
www.LowerMyBills.com
Free online service for consumers to compare low rates on monthly
bills and reduce the cost of living
www.PriceGrabber.com
Free online comparison shopping service to help consumers find
lowest prices for goods and services
www.ClassesUSA.com
Assistance in locating college education resources
www.AutoCheck.com
Vehicle history reports to help consumers ensure they make good preowned auto purchasing decisions
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Education partners
►
www.lifesmarts.org
►
www.jumpstart.org
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