What’s In A Credit Report, What’s My Score and Why Should I Care?

If you don’t know what credit scores are (or how they work) – Don’t worry, you are not alone!  Many people think that because they don’t know much about credit scores, they don’t have to worry about what’s actually in their credit report.  Let’s see how important they really are.  Before you read about Credit Reports, take this short quiz:

Which of these everyday actions are affected by your credit score? (no peaking at the answer!)

a) The amount of interest you pay on your credit card; or
b) The amount of interest you pay on your car loan; or
c) Which dealers will sell you a car; or        
d) Whether you can afford a new car; or
e) Where you are allowed to live; or
f) Whether you get a job; or
g) All of the above. 

If you guessed ‘g, all of the above’, you are correct!  Your credit score has an effect on every one of the actions listed above.  Many people don’t realize that they can be turned down for an apartment or a job, because they have a low credit score.  Even though you might not know your credit score, it is very important to understand how it is created and what it can be used for.  In addition to people who can lend you money, many other people will look at your credit report and score and use that to make a decision that has nothing to do with borrowing money.  That’s right.  In addition to questions about money – whether you get hired for a job and  whether you are approved for an apartment can also be affected by whether you have good credit.

So, how do you protect yourself? Read on….

If you have any questions about this (or any other) issue; or would like to speak with a counselor, please send an e-mail to [email protected] .  We will put you in touch with a counselor and help you the best way we can!

What is a Credit Report?

A ‘Credit Report’ is a record of your borrowing and bill paying habits that can be used by lenders, utility companies, government agencies and a few other folks to decide whether to do business with you.  Your Credit Report will contain the following information about how you pay your bills:  

  • How many times your monthly payments have been paid late;
  • Your outstanding balances;
  • Credit limits on each card that is in your name;
  • How many bills of yours have gone to collections;
  • How old each account is;
  • Whether you have filed bankruptcy in the last ten years; and
  • Whether you are on-time with your utility payments.  

This information is kept for each type of account that you have (mortgage loan, car loan, credit cards, student loans, etc.)

Your credit report will also contain other non bill-paying information, such as:

  • How many times somebody has tried to get a copy of your credit report;
  • Whether lawsuits that have been filed against you, because of a past-due bill;  
  • Whether Judgments have been taken against you, as a result of any of those lawsuits.

Back to top

How Does Information Get To My Credit Report?

Each lender that you have borrowed from (or have a payment history with) sends monthly reports to one of three ‘Credit Reporting Agencies’ (Experian, TransUnion or Equifax).  Those three companies then hold on to the information and release it to any party who is an ‘authorized’ user that has a ‘legitimate business purpose’ to view the information.  Some of them need your permission (Employers, Insurance Agencies, Landlords) and some of them don’t (Banks, Auto-Finance companies, Credit Card companies).

Back to top

How Long Does Information Stay on My Credit Report?

Negative information (late payments, overdue bills, accounts placed into collection or charged-off by the lender) will stay on your credit report for about seven (7) years from the date of your last missed payment.  If you file bankruptcy, it will be there for about ten (10) years.  If you are convicted of a felony, that may never come off of your credit report.

Back to top

Who Can See My Credit Report?

Lenders who have a ‘legitimate business purpose’ can obtain this information, just by submitting your Social Security Number.  (If you have applied for a loan or a credit card, that qualifies as a ‘legitimate business purpose’)  These companies don’t need your permission.

There are other people who can see this information, but only if you give them permission in writing.  For instance, a landlord, an employer and an insurance company can see your credit report, only if you sign a statement that says you want them to see your credit report.  

Back to top

What Is A Credit Score And Can I See Mine?

Each of the three credit reporting agencies mentioned above (Experian, TransUnion and Equifax) assigns a numerical value to the information in your credit report.  This ‘Credit Score’ is what almost everyone who looks at your Credit Report uses to decide whether you have ‘Good’ or ‘Bad’ Credit. 

Scores range from 0 – 850;  with a higher score meaning that you have ‘good credit’ and a lower score meaning that you have ‘bad credit’.  Each agency has a separate formula, so the score you get from each one might be different.  If you learn what your credit score is and it seems low, don’t worry!  There are things that you can do to try and raise your credit score.   

The Federal Government passed a law that says each of the three Credit Reporting Agencies must give you a copy of your credit report once a year, if you ask.  The website sponsored by the Government is AnnualCreditReport.com.  (The site can be confusing, so it’s a little easier – and just as effective – to use the phone number listed there: 1-877-322-8228)  But, BEWARE: only this site will give you your credit report for free.  There are other sites that claim to give you a free credit report.  Any site besides ‘annual credit report’ is NOT sponsored by the Government and is NOT free. 

This is the best way to see if there are any mistakes on your credit report that might be dragging your credit score down.  When you order a free report, you will not get your score, unless you specifically order the score and pay a fee.  (But, be careful to say that you want to pay the one-time fee that is only to see your Credit Score.  Sometimes, they will try to sell you some kind of service that is really a monthly charge.)

You have to order the score from the Credit Reporting Agency, when you ask for a copy of your Credit Report.  While it might be a good idea to get more than one free credit report at the same time, you probably don’t need to order (and pay for) the score from each separate Credit Reporting Agency.     

  • Equifax: Dial 1.800.685.1111 or visit Equifaxes website.
  • Experian: Dial 1.888.397.3742 or visit Experian’s website.
  • TransUnion: Dial 1.800.493.2392 or visit TransUnion’s website.

But, be careful, the Credit Reporting Agencies may try to sell you other products that you don’t need (credit insurance, ID theft insurance, etc.)  Remember to say “I only want to pay for my Credit Score!”

Back to top

What If There Are Mistakes On My Credit Report?

There are rules about how the Credit Reporting Agencies have to handle mistakes or problems that arise.

If you see a mistake on your credit report, you need to send a letter to the Credit Reporting Agency telling them what is wrong and why. (for instance: that bill is not mine….I actually paid that account off years ago….I never had a Diner’s Club Card…etc.)  Include a copy of your Credit Report and let them know what the exact problem is.

The law says that the Credit Reporting Agency must get back to you within 30 days (they don’t have to finish their investigation in 30 days, they just have to say ‘we got your letter and we’re working on it’)  They will ‘investigate’ by sending your letter to the company that reported you to the Credit Reporting Agency in the first place.  (you should get a copy of the response that the Credit Reporting Agency receives)

After the investigation:

  • If the Credit Reporting Agency believes you (for instance, the believe that the bill wasn’t yours, that you paid it, etc.) they have to send you a new – corrected – Credit Report and (if you ask) they have to send it to anybody who has asked to see a copy within the last 6 months. 
  • If the Credit Reporting Agency does NOT believe you, they have to send you a letter telling you that they think the information on your Credit Report is still correct.  If this happens, you can still formally dispute the item on your Credit Report.  This ‘dispute letter’ has to be in writing).

Back to top

Protect Yourself

  • Get a copy of your credit report – www.annualcreditreport.com is a site run by the Federal Government.
  • BEFORE you try to borrow money, get a copy of your credit report and try to spend a few months to raise your credit score
    • Many people find it easier to do this through a local non-profit counseling agency.
  • Dispute any entries that are not yours – If any of the bills on your credit report are not yours, tell the credit agencies. (see ‘how can I fix errors?’ above)
  • Pay off small balances – you could lift your credit score by paying off bills that are really low.

What’s the Law?

  • Ohio has a law called the Credit Freeze Act, that says: 
    • You can use it to make sure that nobody uses your name or social security number to open an account:
    • The credit reporting agencies have to let you put a “freeze” on your credit report, to stop anybody from opening credit or from obtaining loans or services, without your permission.
  • The Fair Credit Reporting Act (FCRA) – was put in place to create rules for the credit reporting agencies and to protect the information about you that they use.
  • The Equal Credit Reporting Act (ECOA) – makes it illegal to turn you down for a loan (or lend you money, but with terms that are worse than what you deserve) because of your: race, color, religion, national origin, sex, marital status, age, or because you get public assistance.