Your credit report contains information about where you live, how you pay your bills, and whether you’ve been sued or arrested, or have filed for bankruptcy. Credit reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home. The federal Fair Credit Reporting Act (FCRA) promotes the accuracy and privacy of information in the files of the nation’s credit reporting companies.
Some financial advisors and consumer advocates suggest that you review your credit report periodically. Why?
- Because the information it contains affects whether you can get a loan — and how much you will have to pay to borrow money.
- To make sure the information is accurate, complete, and up-to-date before you apply for a loan for a major purchase like a house or car, buy insurance, or apply for a job.
- To help guard against identity theft. That’s when someone uses your personal information — like your name, your Social Security number, or your credit card number — to commit fraud. Identity thieves may use your information to open a new credit card account in your name. Then, when they don’t pay the bills, the delinquent account is reported on your credit report. Inaccurate information like that could affect your ability to get credit, insurance, or even a job.
For more information, click here.
- Ask students to summarize major provisions of the Fair Credit Reporting Act. How does the law protect consumers?
- What is the importance of reviewing your credit report periodically?
- Why only authorized persons are allowed to obtain credit reports?
- What must a credit bureau do when you notify the credit bureau that you dispute the accuracy of its information?
- What should you do if you are denied credit, insurance, employment, or rental housing based on the information in the report?
What are common credit report errors that you should look for on your credit report? When reviewing your credit report, check that it contains items about you. Be sure to look for information that is inaccurate or incomplete.
Some common errors in credit reports are:
- Errors made to your identity information (wrong name, phone number, address)
- Accounts belonging to another person with the same name or similar name as yours (this mixing of two consumer’s information in a single file is called mixed file)
- Incorrect accounts resulting from Identity theft
Incorrect reporting of account status
- Closed accounts reported as open
- You are reported as the owner of the account, when you are actually just an authorized user
- Accounts that are incorrectly reported as late or delinquent
- Incorrect date of last payment, date opened, or date of first delinquency
- Same debt listed more than once (possibly with different names)
Data management errors
- Reinsertion of incorrect information after it was corrected
- Accounts that appear multiple times with different creditors listed (especially in the case of delinquent accounts or accounts in collection)
- Accounts with an incorrect current balance
- Accounts with an incorrect credit limit
For more information, click here.
- Why is important to check your credit reports every year?
- Credit bureaus are required to follow reasonable procedures to ensure that your credit report is accurate, then why mistakes may occur?
- Ask students if they have ever been contacted a credit bureau to dispute the accuracy of its information. What was the outcome?
- When you notify the credit bureau that you dispute the accuracy of its information, what must the credit bureau do to rectify mistakes?
- What are your legal remedies if a consumer reporting agency fails to comply with the provisions of the Fair Credit Reporting Act?
Credit reports, produced by credit bureaus, detail your financial history, and are used to develop credit scores. Under federal law, you can get at least one free report from each of the nationwide credit bureaus every 12 months. If you find an error, contact the credit bureau directly and correct the record.
If you cannot qualify for a regular credit card, consider a no-fee or low-fee secured credit card. This is a credit card for which you would keep money (as collateral) in a deposit account at the financial institution issuing the card. For example, if you want a card with $1,000 limit, you might deposit that amount into a savings account at the bank offering you the card. The lender would report how you manage the card to one or more of the credit bureaus, and often it will provide you the opportunity to obtain an unsecured credit card after a certain period of on-time payments. Secured cards may have fees attached to them and may have a higher interest rate, so be sure to do your homework before signing up.
To order your free annual report from the three major credit bureaus—Equifax, Experian, and TransUnion visit www.AnnualCreditReport.com or call toll free 1-877-322-8228.
You have the right to see and correct reports from “specialty” credit bureaus that, for example, track a person’s history of handling a checking account.
For more information, go to:
Building a better credit report
Specialty consumer reports
- Ask students to visit several websites that may provide current information about credit files.
- Bring to class examples of credit related problems of individuals or families. Suggest ways in which these problems may be solved.
- Ask students to talk to a person who has discovered an error on his or her credit report. What was their experience to get it corrected?
- What steps can you take to improve your credit score?
- Which federal laws protect your rights if your credit application is denied?