Lesson 1, Topic 1
In Progress

4.3. How Consumer Credit Reports Are Compiled

ryanrori January 23, 2021

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A credit report on a specific consumer doesn’t really exist until a credit grantor requests it. When that happens, the credit bureau compiles the report from the creditor and tens of thousands of possible information sources — retailers, bank card issuers, banks, finance companies, etc. These sources send updates to the credit bureau each month about how their customers use and pay their accounts.

The credit bureaus also collect public record data from state and county courts. This information is limited to bankruptcies, tax liens, monetary judgments, and, in some states, delinquent child support payments.

When you apply for credit, the lender contacts the credit bureau that they use and requests a report on you, giving them information from your credit applications. If the bureau already has a file on you, they can give the lender that information in a matter of seconds. The lender must have a permissible purpose under federal law before accessing credit information.

One thing to keep in mind about credit reports: They don’t stay the same for long. Because credit grantors continuously update their records. Your report may change from day to day.

How to Avoid Mix-ups

To ensure that you get the credit you deserve, here are a few simple steps you can follow when apply for new credit:

  • Always use the same name. You should not omit your middle initial, use and initial instead of your first name, or use a nickname.
  • Always provide your Social Security number when applying for credit. This helps prevent your credit information from being mixed up with other consumers in the United States with the same name.
  • Always list your address and your previous addresses for the past five years.

What does a typical credit report include?

  • Your name, current and previous addresses, phone numbers, Social Security number, date of birth, and current and previous employers. This information comes from your credit applications, so its accuracy depends on your filling out the forms clearly, completely, and consistently each time you apply for credit.
  • Specific information about each account such as the date opened, credit limit or loan amount, balance, monthly payment, and payment pattern during the past several years. This information comes from companies that do business with you.
  • Federal district bankruptcy records, state and county court record of tax liens and monetary judgments, and, in some states, overdue child support. This information comes from public records.
  • The names of those who have obtained a copy of your credit report. This information comes from the credit reporting agency.

Credit reports do not contain data about race, religious preferences, medical history, income, personal lifestyles, political preferences, medical history, friends, criminal record, or any other information unrelated to credit. Credit reports may also include a credit score that lenders may use to make loan decisions and assign rates. We’ll discuss credit scores a little later.