Essentially, a credit report is a snapshot of you who are, where you’ve lived, your track record in meeting your financial obligations, and other personal information. For example, it lists the payments you’ve made on credit cards, mortgages, car loans, and so forth, and whether those payments have been on time or have been late. If you’ve declared bankruptcy, it will be included in your credit report. If you’ve been sued or arrested, that information will be on the report as well.
The three largest consumer reporting agencies (credit reporting agencies) are Experian, Equifax, and TransUnion). They sell your credit report to businesses that use it to evaluate your creditworthiness or your integrity. So, for example, if you apply for a mortgage, a car loan, or a credit card, those lenders will examine your credit report. Similarly, a potential employer, insurer or landlord may look at your credit report.
Your Credit Report Score
You’ve probably heard of the term “FICO score,” and that the higher your FICO score is, the better your credit rating is. What’s a FICO score? FICO is the Fair Isaac Corporation, and it uses a statistical model to evaluate the various elements of your credit report and produce a score that predicts how creditworthy you are. A FICO score ranges from 300 to 850, and is weighted according to a number of factors. Your payment history is weighted at 35%, you debt-to-credit ratio (how much you owe vs. your credit limits) is weighted at 30%, how far back your credit records go (longer is better) is weighted at 15%, the different kinds of credit you have (such as installment payments and revolving credit card payments) is weighted at 10%, and the number of credit inquiries and new lines of credit opened is weighted at 10%.
Each of the major consumer reporting agencies also has its own scoring system, so you probably have three different credit scores based on each agency’s own statistical models and unique information that they may have.
Negative Credit Report Information
If you’ve had financial difficulties, chances are good that your credit report contains some negative information. Some of that information may be false, but if the information is correct, it could stay on your record for a while. Typically, a consumer reporting agency can include negative information in your credit report for seven years. There are some exceptions, though. For example, a criminal conviction can be included forever, while bankruptcy information can be included for 10 years. If a report was issued in conjunction with a job application that paid more than $75,000 per year, or in conjunction with an application for credit or life insurance for more than $150,000, there is no time limit. Tax liens can stick to your record for seven years after you’ve paid the bill, while information about legal actions or unpaid judgments can hang on for seven years or until your state’s statute of limitations runs out, whichever is longer.
Because your credit score can make a tremendous difference in the amount you pay (in terms of interest rates) for credit – or whether you can obtain credit at all – credit report monitoring is essential to make sure your credit report reflects the facts of your situation. Research estimates that between 70% and 80% of credit score reports contain errors, 25% to 30% of which are serious enough to influence a person’s ability to get credit or get decent interest rates.
If you or someone you know is the victim of credit report score issues, complete our online form or call 475-277-2200. Lemberg Law’s legal team will evaluate your case at no cost to you, and will help you get the justice you deserve.