An Overview of Credit Reports and Their Basic Functions
Just what exactly is a credit report? How does all of that information end up on it? Who makes them, and who makes use of them? These are all questions that are frequently asked by people who are unfamiliar with credit reports and the basics of finance in general.
Credit reports: the basics
Simply put, a credit report is a history of one’s financial activity that is gathered by credit bureaus who in turn then provide that report to businesses and other entities who seek the financial history of someone. There are a total of three major credit bureaus who all operate on a national level; Equifax, Experian and TransUnion.
What is included within a credit report?
The basic information that is included with one’s credit report is their name, former as well as current addresses, overview of employment, general inquiries, public and collection records (e.g. tax liens and bankruptcy files), loan histories and of course credit histories.
How does all of that information actually get onto my report?
Lenders and credit card businesses report all of your account(s) information electronically to the credit bureaus. Now there is no schedule set in stone for the reporting, but generally speaking they companies send updates to the bureaus about once every month. Other details found in credit reports are sent in by tax agencies, courts, and even the post office.
Does the information stay on my credit report forever?
No, the majority of information remains on one’s credit report for a maximum of 7 years. Of course data of a personal nature (such as name, address, etc), and positive nature (paid debts, etc) do not have a set expiration date. Entries of a negative nature however do have expiration limits. Most bankruptcy filings, charge-offs, accounts from collection agencies, judgments, and late payment entries all have a limit of 7 years. General inquiries have a limit of 2 years. Chapter 7 bankruptcy filings however have a limit of 10 years as opposed to 7. Tax liens have one of the longest limits if left unpaid, remaining on a credit report for up to 15 years (or longer).
Who uses the information in my credit report?
Utility companies, lenders, credit card companies, insurance companies, potential employers, landlords, courts and cell phone companies can all potentially make use of a person’s credit report. It is under “permissible purpose” laws that all of these businesses have the legal authority to use one’s credit report for the evaluation and determination of their finances and rates. In the majority of cases though the authorization of the individual is required before a company can make a request for their credit report.