A credit report is a document assembled by credit reporting agencies (CRA).There are three main credit reporting agencies (CRA) in the U.S.: Experian, TransUnion, and Equifax. Their reports contain detailed information about a person, the person’s financial history and financial status. They also contain information such as the person’s current and previous addresses, Social Security number, and employment history.
A credit report can also include a credit history summary such as the number and type of credit cards a person has, whether they are past due or in good standing. Late payments on utility bills, credit cards, and other loans are also reported.
Companies and lenders use the information in a credit report to assign a credit score to a person. A person’s credit score is based on their:
- Payment history, that is whether they pay obligations on time or only when they are past due;
- Outstanding balances on any credit they have, i.e., how much they owe;
- The length of credit history, whether it has only been recently established or comprises several years or more;
- Applications for new credit accounts;
- Types of credit accounts, i.e., a mortgage, car loans, and credit cards.
Credit reporting agencies calculate a credit score based on the information in their credit reports. So, one score can be found on a person’s credit report. It can also be found on a person’s credit card statement or on the online statement. If a person applies for credit, e.g., for a mortgage loan, the lender will usually tell the person what their credit score is.
A person’s credit score can range from 300 to 850. A higher number is more positive and means that a person is more creditworthy, i.e. likely to pay a loan back on time as promised in a loan agreement. If a person is creditworthy, they are more likely to be able to borrow money; lenders will believe that if they lend money to the person, they will be paid back.
A person can have multiple credit scores. They are not calculated by credit reporting agencies that maintain a person’s credit reports. Rather, credit scores are calculated by different companies or lenders who use their own credit scoring systems for that purpose.
A person’s credit score is an important number and affects whether a person can obtain credit, e.g. a mortgage loan to buy a house, and what their interest rate on a loan would be. A person’s credit score can affect whether a person can rent a house or apartment and in some cases, it can even affect whether a person can get a job.
Auto insurance companies often charge a higher interest rate for drivers who have bad credit scores. If a person is having utility service turned on in a new residence, the company will check the person’s credit to decide whether or not they should pay a security deposit.
A person may discover that their credit score is low, when they are refused a loan for which they have applied. There are steps a person can take to improve their score. Anyone who denies a person credit, housing, insurance, or a job, because of a credit report must tell the person the name, address, and telephone number of the credit reporting agency (CRA) that provided the report. Under the Fair Credit Reporting Act (FCRA), a person has the right to request a free report within 60 days if a company denies them credit based on the report.
Some companies may promise to repair or fix a person’s credit for a price, but the fact is that there is no way to remove negative information from a credit report if it is accurate.
If a person has a low credit score, they need to add positive information to their report by obtaining credit, but no more than they can handle financially, and making payments on time.
A person’s payment history affects their credit score more than any other factor; it’s 35% of a person’s credit score. Since payment history is so important to a person’s credit score, having several past due accounts on a credit report hurts a person’s score. Taking care of past due accounts is critical to credit repair. The goal is to have all past due accounts reported as “current” or at least “paid.” So a person wants to get current on accounts that are past due but not yet charged-off.
A “charge-off” is one of the worst account statuses; it happens when an account is 180 days past due. Accounts that are delinquent but less than 180 days past due can be saved from charge-off if a person pays the total amount that is past due. Keep in mind that the further behind a person becomes, the higher their catch-up payment will be.
If a person has past due accounts, the person should contact the creditor right away and ask how they can get back to current on the account. A creditor might be willing to waive some of the late fees or penalties or spread the past due balance over several payments. A person should let the creditor know they want to avoid charge-off, but need help with it. A creditor may even be willing to re-age an account to show payments as current rather than delinquent, but a person has to talk to their creditors in person to negotiate solutions such as these.
An experienced bankruptcy lawyer might be able to help these negotiations. Bankruptcy lawyers are not only for filing for bankruptcy. They are experienced in negotiating with creditors and might help a person repair a bad credit report.
If you pay a charge-off in full, your credit report will be updated to show the account balance is zero and the account is paid. The charge-off status will continue to be reported for seven years from the date of the first delinquency, or late payment. Another option is to settle charge-offs for less than the original balance, but the creditor has to agree to accept a settlement and cancel the rest of the debt.
The settlement status will go on a person’s credit report and remain there for seven years. A person might be able to convince the creditor to delete a charge-off status from a person’s credit report in exchange for payment, but this is not easily done. The most important thing is to pay a charge-off.
It is also critical to take care of accounts that have been sent to a collection agency. A person can pay such an account in full and even try to get a “pay for delete” in the process or they can settle the account for less than the balance due. The fact that the debt went to collection will stay on a person’s credit report for seven years based on the original delinquency, or late payment. But after seven years, it will fall off the report.
Ordering a Credit Report
A person can obtain a credit report from all three of the credit reporting bureaus. A person can obtain a report from each of the credit reporting agencies for free once a year through the website, annualcreditreport.com.
If a credit reporting agency should refuse to provide a person with a copy of their credit report, the person should contact the CRA directly to try to resolve the issue. The CRA should tell a person the reason for denying their request and explain what to do next. Often, the person will only need to provide information that was missing or incorrect on their application for a free credit report. If a person is not able to resolve their dispute with the CRA, the person can contact the U.S. Consumer Financial Protection Bureau (CFPB) for assistance.
It is recommended that a person get a free copy of their reports every year and review them for possible mistakes or fraudulent accounts. If a person finds mistakes they should contact the reporting agency and the business or other entity that is the source of the incorrect information in order to get the mistake corrected. A person’s credit score is based on the information in the report, so it is important that the information is accurate.
Both the credit reporting agency and the source of the incorrect information are required to investigate any mistakes on a person’s credit report. A person who corresponds with a credit agency and a business about mistakes in their credit report, they should keep copies of all of their communications with the credit agency and a business.
Items on a Credit Report
The main information on a person’s credit report usually includes:
- The name and contact information for the person who is the subject of the report;
- A consumer statement or summary of credit status;
- Account histories for accounts reported, including such information as late payments;
- Public records of such information as bankruptcy filings, tax liens on property or outstanding tax debt, and criminal records;
- Student loans and their status;
- Child support obligations and their status;
- Unpaid medical bills;
- Credit inquiries, which means entities that have obtained a copy of a person’s credit report;
- Some credit bureaus issue a credit score; some do not; some require payment for a report of a person’s credit score.
Do I Need a Lawyer?
Dealing with your debt can be confusing and frustrating. A credit lawyer is the person who can help you analyze your credit report, identify problems and help you solve them. They can help you negotiate with your creditors and if you discover that your debts cannot be paid off, a bankruptcy lawyer can help you file for bankruptcy.