The Secret Of Credit Reports
Creditors, bill collectors and bankers have one thing in common: they know about your credit history and have access to your credit report. For anyone who has ever wanted to buy a car or a house, your credit score impacts whether you will be approved for a loan and at what interest rate you'll be offered.
A credit report exists so that financial institutions can rank your' trustworthiness' to pay back the loan. In a world of billions, it becomes impossible to just take someone's 'word' for it. Instead, companies such as Equifax, Trans Union and Experian receive merchant information detailing your activity.
A standard credit report contains a list of every form of credit line you could have opened, including in some areas your utility bills. They list the name of the institution, the full amount borrowed, the payment, how often the payment is due, if payment is up to date and an arbitrary score assigned by that system as far as number of months paid and on time. Then using a formula, the credit agency tabulates all of these numbers and rates you with a final score.
When any company or individual requests a copy of your credit report, they are required to obtain your consent. However, agencies polling to offer you a credit card can also create a 'hit' on your credit report. Every single time your report is accessed by anyone for any reason, it adds an information line to your report.
Because you may receive a line of credit and it can take up to 90 days or more before it actually appears on the credit report, the number of hits to your report is also factored into your score.
So, imagine if you were offered 10 pre-approved credit cards via the mail, each one of those companies likely created a 'hit' on your credit report. If you shred them and toss them into the trash, it can take four to six weeks for those hits to no longer affect your score. While their effect is minimal, figure how many free offers for credit you get every week. It really begins to add up.
In the end, a credit score vouches for your reliability in paying your debts. It means that you are a good 'risk' and the company is less likely to lose money on you. With the list of those asking for your credit score growing, credit checks are becoming a regular function in opening a bank account, renting an apartment and applying for a job. Some employers require a good credit score as well as a good work history on your resume to hire you into their companies.
No matter the reasoning, sound or otherwise, behind asking for your permission to pull a credit report, it is an invasion of privacy and it calls into question even the most honest and reliable individuals. Clerical, human and computer errors can all cause inaccuracies. All it takes is one misreport by a company to create backlash in your credit scores. Combine human error with robbery (such as identity theft) the matter becomes especially serious.
You can repair the damage to your credit report through prevention, contact and persistence. Always pay your bills on time, report any issues with payment immediately to the company and avoid your bills being sent to a collection agency.
Contacting a credit agency to report an error on your report can take 14 to 21 days to be straightened out. By law, if you dispute a line on your credit report, they are required to contact the reporting company. If the company does not respond within a certain time frame, the error must be removed.
But errors cost time and money. Some agencies do not react quickly, despite the law, and it can take frequent contacts to repair inaccuracies. Some credit agencies are becoming more and more Internet savvy and this allows the end user to contact them via a website or email rather than posting a ground letter.
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