Credit History Report
It's a magic word with actual magic power since it reflects a person's way of handling money in general and credit in particular. The word 'history'
denotes that the Credit History Report looks at a person over a longer period of time, to be specifically: life-long.
On one hand a credit history is a good thing because it enables a business to see in what way you fulfill your monetary obligations, whether you pay your bills
on time or not, whether you can afford to create new obligations, and whether you maintain this attitude over a long period of time.
For the person that is reflected in a report a credit report is apparently only a positive thing as long as you have high scores, meaning the person
is evaluated as responsible or very responsible.
Other countries don't have this type of reporting necessarily which means that you don't know upfront if a person who e.g. wants to rent an apartment
has shown that he/she normally pays the bills on time. Most of the time a type of credit reporting is only available among businesses.
The 'not so good' thing about credit reports is that they may contain errors and they have to be checked on a regular basis by the individual. This is
important and provides the person with the exact information that a third party inquirer, e.g. a lender, a realtor, a bank, etc. will receive.
What data are reflected in a credit history report?
Identification section: name, date of birth, Social Security Number, current address, previous addresses, phone number, and employer.
Public record section: e.g. former bankruptcies (information kept for 10 years!), foreclosures, tax liens, court-ordered payments, failed
Account section: lists credit cards, loans, bank accounts including the dept involved and your history of paying off (monthly)
Late payments can remain in your report up to 7 years.
Inquirer section: lists who made an inquiry to view your report
Who can be an inquirer?
A bank or lender, a realtor, basically third parties which are engaging in a relationship with you that involves financial aspects. If you want to
finance a car, buy car insurance or other insurance, even an employer may inquire but has to get your permission so that he cannot check on your
financial background on a regular basis. The latter is done by banks and credit card companies which want to use the information for marketing
purposes or just to be reassured that you're still fine (Banks are worried about all types of things all the time, that's part of a bank's nature).
So, what can you do to establish positive records, to maintain and control them?
Building up a positive credit history
- Start early in your life - the length of the credit history is a factor, because it can show how stable, relient, and consistent you are.
- Pay all bills on-time; concerning credit cards: at least the minimum amount; better is paying off the full amount each month.
- Keep your debt level as low as possible - too many obligations will prevent getting credits, loans, even an apartment. A rule-of-thumb is that your monthly obligations shouldn't be higher than a third of your income.
Have only 2-4 credit cards and may be the one or other department store card. Having too many credit cards means to a lendor that you could borrow
an immense amount of money if you want to - that signals a kind of potential risk. Somebody could ask himself why you're applying for so many cards, whether you have a reason...
Some other maintenance work you should do, is:
Who are the credit bureaus that collect the data and maintain your 'history'?
If you had a legal name change (marriage, legal change, divorce, etc.) notify your creditors (banks, lenders, department stores who issued a card,
electricity companies which often report credit records to the credit bureaus etc.). This is important in order to avoid errors on your future
reports. You have to notify the Social Security Administration anyway to receive a new 'Social Card' (not a SSN!)
- Same procedure for your address in case it changes. You need to receive your bills at the correct address in order to be able to pay them!
Equifax, Experian, and TransUnion are the 3 major ones.
All three may store (and receive) different information, but most likely your report will look
the same. However, it's recommended to check all three from time to time, at least once a year. That can e.g. be done via their websites. But it's
usually not free! They charge you depending on what type of report you request, e.g. they may utilize a point system (scoring system) that summarizes
a person by assigning a score! This is an optional information, because it's rating you, and when it is included in the report it costs a couple of dollars more. Check out sample reports on their website to figure what you need.
Some states have ruled that one report per year has to be issued for free to every consumer when he asks for it.
Other regulations say that you have a right to review your report for free when there's evidence of identity theft, or when a loan was denied and you suspect that your report is
wrong. But all this may be different handled from state to state.
Who sends records to the credit bureaus?
This is done voluntarily, let's say, the 'community' of lenders and companies which need to have some trust in you, they send records about your
paying mentality to the credit bureaus. Examples are: banks, lendors, many electricity companies. That implies that not all bills you pay will
contribute to a positive credit history. If you want to know whether a company reports or not you have to ask the company.
New law brings light into the mystic of the credit history report.
In November 2003 Congress passed a new law that can help you ensure the accuracy of your credit information and monitor your credit files for signs
you may be a victim of identity theft.
The law will enable you to obtain a free copy of your credit report once a year from each of the three major
credit bureaus; this provision will take effect over a period of nine months, beginning December 1, 2004, in western states and moving east with
completion scheduled for September 1, 2005. Nationwide as of December 1, 2004, you’ll have the right to learn your credit scores, which are designed
to help predict how likely you are to repay a loan or make payments on time.
As of that same date, merchants also must notify you if they plan to report negative information about you to a credit bureau.
The Federal Trade Commission (www.ftc.gov) and the Federal Reserve Board
(www.federalreserve.gov) have issued rules to put the new law into effect.
We have placed a link (called NEXT-Link)at the end of this page with further information and where you obtain the Free Credit Report.