Credit Bureau Information

Basic Credit Bureau Reporting

The consumer reporting agencies
TransUnion, Equifax, and Experian (formerly TRW) are the three national consumer reporting agencies that keep records on consumers. The reporting agencies work with lenders, creditors, insurers, and employers to update and distribute your information to the appropriate institutions. Here's an example of how the system works:

1. When you apply for a new credit card, the creditor requests a copy of your financial history from the consumer reporting agencies. This causes a "hard inquiry" to be recorded on your credit report. 
2. The creditor uses your credit reports and scores along with income and debt information to determine what rates to offer.
3. You start to use the new credit card and the creditor reports your activities to the consumer reporting agencies about every 30 days.
4. The consumer reporting agencies update your credit report as they receive new information from creditors or lenders.
5. Your credit profile changes based on your financial activity. The next time you apply for a credit card or loan, the process repeats.

Your credit report
Your credit report is divided into six main sections: consumer information (address, birthday, and employment), consumer statement, account histories, public records, inquiries, and creditor contacts. When you open a new account, miss a payment, or move, these sections are updated with new information. Old negative records will stay on your credit report for 7 to 10 years. Positive records can remain on your credit report longer. Not all creditors report to all of the consumer reporting agencies and the agencies obtain their data independently so your reports could be substantially different from each other. That's why it's important to check your three credit reports every 6 to 12 months to ensure that the information is accurate and up-to-date. You can request your FREE annual credit report online, by phone or by mail.

Correcting inaccuracies
Under the Fair Credit Reporting Act, consumers are protected from having inaccurate information on their credit reports. If you find an inaccurate record on your report, try contacting the creditor or lender associated with the mark first. These companies can usually correct the mistake and send an update to the consumer reporting agencies. If you can't make progress this way, you can also dispute the inaccuracy directly with the consumer reporting agencies.

Working the system
Managing your credit and maintaining a good credit history can lead to better interest rates on major purchases. We recommend that you check your credit reports every 6-12 months or at least 3 months before a major purchase in order to guard against damaging inaccuracies and identity theft. Routine check-ups along with paying your bills on time, keeping your credit card balances below 35% of their limits, and correcting any negative inaccuracies will help you maintain a healthy credit profile.

Top 5 Credit Misconceptions
We have all heard the rumors from neighbors, relatives, or friends. There are a wide variety of myths floating around about what you should and shouldn't do to manage your credit. TrueCredit has exposed these urban legends to provide you and your informers with the truth about credit:

1. Your score will drop if you check your credit.
   Fortunately, this one is definitely not true. Checking your own report and score is counted as a "soft inquiry" and doesn't harm your credit at all. Only "hard inquiries" from a lender or creditor, made when you apply for credit, can bring your credit score down a few points. Worried about damaging your credit while shopping around for a loan? Multiple inquiries for the same purpose within a short amount of time (a few weeks) are grouped together into a less damaging period of inquiry.
2. Closing old accounts is a good idea.
   To close or not to close, that is the question. Many people advocate closing old and inactive accounts as a means of managing their credit. But they should think twice before closing the oldest account on their credit reports. Canceling old credit accounts can lower a credit score by making the credit history appear shorter. If you want to reduce your levels of available credit, ask for your credit limits to be lowered or close newer accounts instead.
3. Once you pay off a negative record, it is removed from your credit report.
   Negative records such as collection accounts, bankruptcies, and late payments will remain on your credit reports for 7 to 10 years. Paying off the account before the end of the set term doesn't remove it from your credit report, but will cause the account to be marked as "paid." It is still a good idea to pay your debts, just be aware the major change in your report will come when the negative records expire.
4. Being a co-signer doesn't make you responsible for the account.
   When you open a joint account or cosign on a loan, you are taking on legal responsibility for the account. Any activity on these shared accounts, good or bad, will show up on both people's credit reports. If you co-sign for a friend's auto loan and he or she doesn’t make the payments, your credit profile will be hurt by their actions and vice versa. The only way to stop this double reporting is to refinance the loan or to have the creditor officially remove you from the account.
5. Paying off a debt will add 50 points to your credit score.
   Your credit score is calculated using a complex algorithm that takes into account hundreds of factors and values. It is very hard to predict how many points you can gain by changing one factor. For a person with a high credit score, just one late payment can cause a significant drop. If a person has a low credit score, it may not cause a large drop at all. Just keep paying your bills on time, reducing your debts, and removing negative inaccuracies from your credit report. Good financial behavior and time are the two most important factors for your credit score.

Credit Warning Signs

Keeping your finances running smoothly is simple when you know about possible detours that lie ahead. The five danger signs described here are the top reasons for credit report troubles. Spot them early and you can avoid any bumps in your financial journey.

Strange data
Not sure where that credit card came from? Unauthorized account or address changes could be a sign that a thief is using your identity. If you find a credit card or loan that you don't remember opening, call the creditor immediately to investigate. If it turns out to be a case of identity theft, have the account closed and follow the fraud resolution procedures outlined in the identity theft section of the Credit Learning Center.

Maxed-out credit cards
High balances on credit cards are common, but that extra debt could be bringing your credit score down significantly. Reducing your balances to below 35% of your credit limits can save you a bundle on interest charges.

Late payments
Paying your debts late not only costs you a fee but also damages your credit. If you have had trouble making your payments on time lately, evaluate what is causing the problem. Ask your creditor to move your due date to a different time of the month or sign up for online bill payment service that can be programmed to remind you before the due date.

Mistaken identity
With over 290 million people in the United States, a few crossed credit records can be expected from time to time. Finding someone else's credit data on your report is especially widespread for people with common or shared family names like "Joe Smith Jr." If you find something that does not belong on your report, contact the consumer reporting agencies to have your data corrected.

Credit score differences
A dramatic difference in one of your three credit scores can point to a potential error on that report. If one of your scores is 50 points lower than your other two scores, it is a good idea to look closely at that score's credit report for inaccuracies or signs of identity theft.

Credit Scores

Credit bureau scores are often called “FICO® scores” because most credit bureau scores used in the U.S. are produced from software developed by Fair Isaac and Company. FICO® scores are provided to lenders by the major consumer reporting agencies.

FICO® scores provide the best guide to future risk based solely on credit report data. The higher the credit score, the lower the risk. But no score says whether a specific individual will be a “good” or “bad” customer. And while many lenders use FICO® scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable for a given credit product. There is no single “cutoff score” used by all lenders and there are many additional factors that lenders use to determine your actual interest rates.

What’s in your FICO® Score?
FICO® Scores are calculated from a lot of different credit data in your credit report. This data can be grouped into five categories as outlined below. The percentages in the chart reflect how important each of the categories is in determining your FICO® score.

These percentages are based on the importance of the five categories for the general population. For particular groups - for example, people who have not been using credit long - the importance of these categories may be somewhat different.

Other Names for FICO® Scores
FICO® scores have different names at each of the consumer reporting agencies. All of these scores, however, are developed using the same methods by Fair Isaac, and have been rigorously tested to ensure they provide the most accurate picture of credit risk possible using credit report data.

~ Information courtesy of Truecredit, TransUnion, and myFICO®.com.