Over the years and through working with homeowners in getting their loans and saving their loans, I have realized just how sadly undereducated our population is to credit. One reason is that we just don’t have enough education about credit to make informed decisions. Secondly, our relationship to credit is such that some of us believe we are stuck with whatever our credit report says. FInally, we are not aware of the many consumer protection laws that help us protect our credit. With this in mind, I am creating a series of blog posts to cover the critical things regarding credit that everyone should know.
Credit Reporting Agencies or CRAs, more commonly referred to as credit bureaus, maintain the large databases which hold all of our financial information. It is of interest to note that Credit Bureaus are not run by government agencies but rather they are private corporations that focus on maintaining these databases. There are three major credit bureaus in the country; Experian, TransUnion and Equifax. So who uses CRAs? On the shortlist are banks, stores, employers, insurance companies, and pretty much anyone who wants to verify your credit history. The CRAs, for a fee, collect and sell information about your credit history and ensure the integrity of the database.
So for those of you are now curious, how do we know what these CRAs report is completely accurate? The painful answer to this is – we don’t. The information collected is entirely dependent on the accuracy of information reported by your creditors. The CRAs do not verify the information when it is received. To combat the spread of possibly inaccurate information, it is good to pull your credit report frequently. Over the years, various consumer protection laws have been enacted to protect us from the spread of inaccurate information. This allows us to dispute any information that shows up on our credit report which could lead to denial of credit, insurance coverage, or in some cases employment.
There are a few different types of credit reports used for a number of purposes.
CONSUMER CREDIT REPORTS
These can only be pulled by the consumer. These reports include all the information that creditors see with the exception of the credit score. Typically, CRAs charge the consumer to calculate the credit score. Most importantly, by pulling your own consumer credit report, you will not affect your credit score. Any other type of report will count as an inquiry and affect your score. We will discuss what affects your score in a later post.
INFILE CREDIT REPORTS
Infile reports are pulled by the creditor to check your credit history. These reports can be from one or more of the three credit bureaus. These may or may not have a score, however they do count as an inquiry against your credit score. Every time you run an infile report whether it is with an auto dealer or a credit card company, your score is affected. These reports require your authorization to complete.
RESIDENTIAL MORTGAGE CREDIT REPORTS
RMCRs are much like infile credit reports, however they contain the merged information of all three credit reports and all information is fully investigated to create the most comprehensive credit profile there is available. These reports are typically made when you are applying for a mortgage loan. These reports also require your authorization to complete.
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