Credit Basics & Education
Learning to understand how the credit system works can be an arduous and confusing task. There are many misleading as well as misinforming information surrounding credit scores and one of the most common belief is that once you have bad credit, you will be stuck with it. This myth is untrue. It's time to get your good credit back! Improve your credit by understanding the basics.
Whenever you apply for a credit card, a loan, purchasing a car, or purchasing a house, the lender will pull up and review your credit report before deciding to approve your request. It is important to know where your credit stands so you check it months prior to making large credit purchases as those mentioned above.
There are 3 official credit bureaus who provide credit reports: Experian, Equifax, and TransUnion. Credit bureaus are not affiliated with the government and are for-profit corporations, which means they can sell your personal information for money.
A credit report contains a history detail about your financial behavior and covers four types of information:
Personal Information: Your name, current and previous addresses, telephone numbers, social security number, date of birth, and previous/current employers.
Public Record Information: This section contains bankruptcy information, unpaid tax liens, and others. Bankruptcy can remain on your credit report up to 10 years and 15 years for tax liens.
Credit Information: Shows the specific account information for credit cards or loans such as the type of account (joint or cosign), date the account was opened, the credit limit, the loan amount, current balances, monthly payments, and payment patterns (showing whether payments were on time or overdue). If you make a late payment, it is reported to at least one, if not all of the three major credit bureaus and eventually added to your credit history. Any negative credit can become a credit obstacle despite the amount of positive credit you may have. Negative information can remain in your history up to 7 years.
Credit Report Requests: This includes information of who has obtained credit report as well as who has recently given your name and date of the inquiry. The Fair Credit Reporting Act, states that credit grantors with authorized purpose may inquire about your credit information without your prior consent.
Fair Credit Reporting Act (FCRA)
The FCRA was established in 1970 to promote and insure fairness, accuracy, and that consumers will be able to obtain a credit report at a reasonable price, regulates who has permissible purpose to acquire a consumer's report, and outlines the reporting periods for negative information on reports, which is usually 7 years for most items except for bankruptcies and unpaid tax liens. Credit Bureaus will tell you that it is 7 years by law, but these are maximum limits, meaning there is no set minimum. The FCRA exists to help protect you from having such detrimental information remain on your credit file longer than it should.
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