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Credit Report FAQ'sWhat’s a consumer credit report?When you apply for a mortgage loan, one of the first things a prospective lender will do is to review your credit report. Your credit report gives a lender an indication of how likely you are to repay they money they are lending you based on how well you've repaid other lenders in the past. The consumer credit report is a record that documents someone’s credit payment history, based on information provided by the companies that extend the credit. A credit report may also contain information from public records, resulting from civil action if someone fails to fulfill their credit obligations. Other personal information is also included, which helps distinguish one borrower from another. What exact information is included in a consumer credit report?1. Personal identifying information, collected from the information the consumer provides when applying for credit. This typically includes name, date of birth, Social Security number, name of spouse (if married), current and previous addresses and current and previous employers. 2. Credit payments and history, as reported by the companies that extend the credit. This detailed information is about credit accounts—balance, credit limit or loan amount, monthly payment, with payment patterns noted for previous years. 3. Inquiries, provided by the credit-reporting agency. This includes the names of lenders or others who requested and received a copy of the consumer credit report, and remains on the record for as many as two years, which is a allowed by federal law. 4. Information from public records, which includes federal district bankruptcy records, tax liens and judgments, collections, and information from state and county court records. In some states, delinquent child support is also reported to the consumer credit databases. How are consumer credit reports used, and who can see them?Typically, the consumer credit report is used by lenders, as a starting point to rapidly and objectively determine if you qualify for credit. And of course, you may obtain a copy at any time. But federal law mandates exactly who may get a copy of your credit report and how it can be legally used. Under the law, others may legally review your report when:
What’s the federal law that regulates the consumer credit report?The Fair Credit Reporting Act (FCRA) stipulates and mandates activity regarding credit reports, because it regulates credit-reporting companies. The law also regulates, or declares who can access information and determines how notification to the consumer occurs. This law is designed to protect consumers' rights, and grants consumers the right to obtain and review their credit report, and to challenge information in the credit profile How long does information remain on a consumer credit report?Positive credit information remains on the report forever. But federal law mandates the length of time negative information stays on a credit report, and it’s a right consumers should exercise since negative information has a great impact on a consumer’s ability to obtain credit. By law, most negative information must be deleted after seven years. This information includes Chapter 13 bankruptcy, where partial or full debts are paid in accordance with a payment schedule. It also includes late payments, collections and judgments filed in court—even those accounts paid in full after delinquency. On accounts, the seven-year clock starts ticking on the date of the original credit delinquency. On public records, the filing date is used to define the seven-year date when negative information is erased. Exceptions: In the case of a Chapter 7 or Chapter 11 bankruptcy, information remains with the credit report for 10 years. Credit inquiries about your credit history stay on the report one-two years, contingent upon the type of inquiry. What do lenders look for on the credit report?Lenders and their guidelines vary. But in general, the credit report—coupled with your credit application—reveals your historical willingness to pay debt and your capability for paying and managing financial obligations. To determine their risk, lenders review and assess:
What does the information from the credit report and loan application show lenders?This information is often referred to as the three C's of consumer credit: Character, Capacity and Capital/Collateral. Here’s what the three C’s show lenders: 1. Character: Your employment and living stability, or length of time in a job or at the same address, give lenders an idea of your personal character. Your financial character, or financial reputation, can be determined by reviewing your track record with your mortgage, credit card debt and bank or auto payments. What can hurt my chances of getting credit?As mentioned, lenders and their lending guidelines are similar, but they do vary. Some weigh information from the loan application equally or more than lenders who primarily use information from a credit report. You may have the perfect job, but your credit history is new or reflects financial difficulties. For example, your income may be suddenly reduced or perhaps you’ve recently changed location and career. Or, perhaps you’ve had a sudden windfall or remarkable pay increase, but your credit report is flawed with dings. If you’re denied credit by a lender, you’ll find most are willing to explain their reasoning. And it’s a good idea to ask for an explanation—before you apply again—since too many credit inquiries may lower your credit opportunities even more. I’m divorced, but during my marriage, my spouse and I incurred debt. What do I do? I discovered information on my report that’s not about me. What should I do?Sometimes, incorrect information turns up on a consumer's credit report. By periodically evaluating your credit report, you can monitor its accuracy. You'll want to report inaccuracies or contest incorrect information with the credit bureau that reported the information; all three main credit bureaus offer guidelines for a remedy. It does take time, so it's a good idea to check your credit report before you apply for credit. Or, you may be a victim of credit fraud. Credit fraud! What do I do?Credit fraud—or even identity theft—occursmost often when someone illegally uses your credit card, obtains and uses your credit card account number or opens new accounts using your personal identifying information. If you believe you’ve been a victim of credit fraud or identity theft, you’ll want to take steps now. Report your suspicions right now to lenders or the companies which extend your credit. You should probably report any suspicious activity to other lenders or those involved in your financial records or obligations since credit fraud may quickly move to the level of identity fraud. Once you resolve the situation, you’ll want to work closely with the credit bureaus to make sure your credit report is corrected or protected from this illegal activity and the consequential drastic results. If you have other questions about your consumer credit report, just give us a call today at 301-528-0022.
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