Most people are not aware of legal rights when it comes to credit reports and credit bureaus. To make informed choices and decisions, one must know what they mean and how important they are when it comes to lending and borrowing. A credit bureau is an organization that collects and maintains the credit information of an individual and sells it to consumers, creditors, and lenders. This information is sold in the form of credit reports.
There are several credit bureaus in the USA; however, the biggest names are TransUnion, Equifax, and Experian. These credit bureaus not only collect and maintain credit reports of people, but they also offer several solutions that enable a business to make better and informed decisions.
What kind of information do credit bureaus collect?
The credit bureaus collect a lot of information about an individual. This information relates to the credit history of a person, and it begins from the time that the credit account is opened. For example, credit bureaus will collect data that pertains to the sum of credit that one uses, , the amount of available credit, public record details like foreclosure, tax liens and repossession. These credit bureaus also keep information like the present and past addresses, present and past employers, birth date, information on salary, and more if available. With this information, the credit bureau will not calculate your credit score but will use it to verify your identity.
Where is this credit information sourced from?
Credit bureaus rely on banks and other businesses to get consumer information. Most of the companies that you conduct business with send reports regularly on accounts that are open. These credit bureaus derive information from public court records as well. When it comes to getting information, these credit bureaus deploy different methods, and they will never share information with one another.
Credit bureau data- who uses them?
The most common users of credit bureau data are issuers of credit cards and banks. Several other companies check with credit bureaus to make key decisions on you. Insurance companies, employers, landlords, and other debt collectors request information from these credit bureaus.
Banks and insurance organizations are able to get pre-screening lists from credit bureaus. These companies need this list for reaching out to potential customers with product and service offers. For instance, a credit card issuing company might request a credit bureau for a list of individuals that have a high credit card balance so that they can send these consumers promotions as well as offers for credit card balance transfers. This is why you get credit card offers that have been pre-approved in your bank account and how an unsolicited mortgage refinance offers lands on your doorstep.
Understanding the laws pertaining to credit reports and credit bureaus
Credit bureaus come under by The Fair Credit Reporting Act or the FCRA in the USA. This Law is a Federal Law, and it provides guidelines on how credit bureaus must function. The Law provides consumers to get an exact credit report; however, if one finds disputes in their credit report, they can approach the credit bureau for rectifications. Here, the credit bureau conducts an investigation and corrects the mistakes that have been reported by you.
Free credit reports by credit bureaus
One can also get a free credit report from these credit bureaus. However, note that the credit reports of two credit bureaus are not similar. For instance, an Equifax free credit report will differ from that of a TransUnion free credit report. Again, in some cases, the whole account might be missing from a credit report. One has the right to request a credit report from any of these three credit bureaus. Under The Fair And Accurate Credit Transactions Act of 2003 which is an amendment to the FCRA Act, an individual has the right to one free credit report every year from each one of these three credit bureaus along with agencies that offer consumer reporting. You are entitled to get a free credit report from any one of the above three credit bureaus if-
- You have a rejected application due to the wrong information posted on your credit report
- You are unemployed and plan to look for a job within 60 days
- You are supported on welfare
- You have been a victim of identity theft
There are errors in your credit information
You should never take your credit report for granted. Do not assume that everything listed on your credit report is accurate. There can be errors in your credit report, and it has been seen that at least one in every 20 people have mistakes in their credit report. There are instances where the mistakes of another person will land up in your credit report. This takes place mostly when the name or personal information is more or less the same as yours. However, under the Federal laws of the USA, you can apply to rectify a dispute. The process might be complex; however, it does give you the chance to rectify mistakes in your credit report with success.
Note that a credit bureau can only give you information. This data is used by creditors and lenders to accept or reject an application. The bureau does not have the legal right to make any decisions relating to credit. In case, you believe that a decision has been done in error, you may request the business to re-check the credit report to make sure there are no further mistakes that will impact your ability to get approval.
Therefore, from the above, it is evident that credit bureaus and credit reports provide information to creditors and banks when it comes to any lending matter. One should be aware of one’s legal rights when it comes to the access and viewing of credit reports. In case, errors are spotted, one should make sure that they are rectified by notifying credit bureaus and have them make the corrections post verification with success.