Most consumers haven’t seen their credit report in a year, think it’s packed with a credit score and believe credit bureaus approve or deny credit.
On all three counts, that’s just wrong.
The National Foundation for Credit Counseling (NFCC) says it’s important to know what a credit report is and what it isn’t and too many consumers don’t.
“Even though consumers can obtain their credit report free of charge, the recent NFCC Financial Literacy Survey revealed that 62 percent of respondents had not ordered their report in the past 12 months,” said Gail Cunningham, NFCC spokeswoman.
She added, “An accurate credit report is critical to a person’s financial future, and consumers need to be aware that the responsibility for reviewing their report lies with them.”
Every consumer should obtain copies of their credit reports from the major credit reporting agencies – Experian, Equifax and TransUnion – every year and really get to know their credit report.
Your credit report is 100 percent, no-strings-attached free, but only from AnnualCreditReport.com – the only federally-sanctioned service for this purpose.
Sound alike web sites – including the television marketing-heavy behind the comical band of musicians with the catchy tune promising free credit reports – will force you to buy credit monitoring services before they “give” you anything. The services are legal, but the pitches can be misleading and, chances are, you don’t even need their service.
But that’s another story.
AnnualCreditReport.com actually gives you three free credit reports a year, one from each credit reporting bureau.
What is a credit report?
Your credit report is a track record of your credit history. Creditors use it, along with other information, to evaluate your risk as a borrower.
It records how much credit you’ve sought, how much credit you have and how you’ve managed that credit – the good, the bad and the ugly. It also contains your address, employment information, Social Security Number, birth date and other information that identifies you.
Credit reporting bureaus are repositories of this information provided to them buy creditors and other financial sources as well as public record sources.
The bureaus sell the information to lenders, insurers, employers, and other businesses that use your credit report as a tool when you apply for credit, insurance and sometimes employment or a security clearance.
A consumer’s credit report generally does not contain their credit score, a numerical rendition of your credit worthiness – or lack thereof.
It also does not include your race, income or medical history.
“One of the most common misconceptions is that the credit bureaus are involved in the approval or denial of credit, which is not true,” said Cunningham.
Why do you need to see your credit report?
The Consumer Financial Protection Bureau (CFPB) recently adopted a rule to establish the first federal program to supervise consumer reporting agencies, for good reason – the bureaus haven’t always had your best interests at heart.
If the nation’s financial industry watchdog is rolling out regulatory oversight on the bureaus, that alone is a pretty good incentive for you to perform some oversight on your own credit report.
Cunningham says you want to see your credit report, before you apply for credit, so you don’t get any surprises with you sit down with a creditor. That will hold you up like a shopper applying for retail credit in the checkout line.
Accuracy is your primary concern. You want to make sure both your personal information is correct and that your credit information is correct. If not, you’ll need to take steps to correct it. The Fair Credit Reporting Act gives you the right to correct mistakes on your credit report.
Dispute incorrect information directly with the credit reporting bureau through which the report was obtained. The bureau must then investigate your concern and correct or delete inaccurate or unverifiable information, usually within 30 days.
Accuracy isn’t just about errors. You also want to verify that outdated information has been removed and to check that you haven’t been a victim of identity theft, in which case there could be credit activity you didn’t initiate. Errors can and will impact your credit score, which lenders also use to approve or decline your application for credit.
Quick-fix fakers are out to get you
In addition to legal come-ons related to “free” credit scores, there are real frauds who will promise to “fix” your credit report – for a fee. They are not out to help you, they only want your money.
Unscrupulous businesses charge high fees but offer no legitimate help beyond what consumers can do for themselves at little or no cost, said Cunningham.
Especially watch for scammers who offer to create a new identity and credit file, or guarantees to remove late payments or other negative information from your report.
It’s not going to happen – no matter how much money you give them.
“Since the credit report is meant to be an accurate snapshot of a person’s credit history, consumers need to remember that if the report contains negative information that is true, it needs to remain a part of the report,” continued Cunningham.
“Filing a frivolous dispute benefits no one,” she added.
Tuesday, July 24, 2012: “Consumer Financial Protetion Bureau grabs regulatory reins of consumer reporting industry”