Consumer Credit Report
The first credit cards appeared in the late 1940s and early 1950s. Flash forward to 2011, and people around the world spend more on their charge cards than they spend in cash. According to the Federal Trade Commission, more than $2 trillion worth of credit card transactions take place in America every year. That’s why consumer credit reports are becoming more important than any other single piece of financial information.
Consumer’s personal credit worthy status is tracked via credit reports. The overall score on your credit, known as a FICO score after the company that developed it, is a way for creditors to evaluate the value of a line of credit extended to a consumer. FICO scores can be as low as 300 (representing a high risk to lenders) or as high as 850 points ( representing a low risk) and these score are the ultimate factor for 3 out of every 4 credit applications, from loans to insurance. In 2010, half of all Americans had a FICO score between 700 and 800.
How Are FICO Scores Determined?
Credit bureaus use a complex mathematical equation that analyzes your credit history and credit report to spit out a FICO score. There are five basic factors that go into determining your FICO score–previous credit history, current level and amounts of debt, the length of time credit has been in use, kinds of credit available, and the amount of new credit you’re applying for.
Consumer credit reports are divided into seven sections.
Personal Data
The first section of your consumer credit report contains basic information about you. Your current and previous addresses, your social security number, and your reported employment history are the most important for creditors. This is the most lucrative section for people looking to steal your identity, which is why your credit report is so valuable to identity thieves and why you should shred documents that contain these details.
Credit History Summary
Your consumer credit report’s second section shows a summary of your recent credit history. Going back seven years, this section shows your number of credit accounts (both closed and open), the kind of credit accounts you have (be they a personal loan, home mortgage, revolving credit, or whatever), the number of new credit inquiries for the past fiscal year, any credit accounts that are past due, and credit accounts you have in good standing. In general, the more credit accounts you have in good standing, the more credit you have available.
How does this second section affect your ability to get a loan? The bank offering you a loan will look at your available credit and assume that you’ll use all credit sources you can to pay your loan note. If you have ten credit cards even with a zero balance, the bank will factor in payments to those accounts. That means the bank sees more of your money tied up in those credit accounts, and may not approve you for as much credit as you have available.
Detailed Credit Account Info
The third section of your consumer credit report shows detailed credit account information. This section shows the names, account types, account numbers, dates opened and closed, and the balance and status of each credit account on your credit record. This information also shows your payment history, the date of your last use of the credit account, and detailed contact info for the creditor.
All of your past-due accounts and negative credit history reports will show up in this section. This is the section of your report most often challenged by consumers for false information. After you file a report, the credit bureau has up to 30 days to act, either removing the information or verifying it.
Credit History Inquiries
Many people overlook the section of their consumer credit report that show credit inquiries. Any time a creditor or potential lender queries your credit, it is reported here. Inquiries are classified as either hard or soft.
Hard inquiries are when you apply for something and the creditor looks at your credit report. These hard inquiries affect your credit negatively, and can even drop your FICO score.
Soft inquiries are when your current creditors look at your credit report, or when credit card companies query your report to see if they can offer you a credit card. Soft inquiries don’t directly affect your FICO score.
Turned-Over Accounts
The fifth section of consumer credit reports shows any credit accounts that have been turned over to collections. This happens when you fail to make timely payments and the creditor reports you to a collection agency to get their money back.
Liens, Garnishments, and Financial Judgements
The smaller sixth section of your consumer credit report shows potential creditors and lenders detailed information about any liens, wage garnishments, or other financial judgments that have appeared against you in court. That counts for federal, state, or county court records. There’s no way to dispute or remove anything from the sixth section without judgement by a court.
How to Dispute Consumer Credit Report Details
The final section of your consumer credit reports tells you how to dispute any of the information on your consumers credit report.
The only way to avoid these kinds of problems on your consumer credit reports is to make your payments on time and don’t ignore negative credit information from your creditors.