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Understanding Credit Reporting Agencies and Potential Personal Benefits

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There is a lot of financial risk associated with lending money to individuals. Therefore, commercial institutions such as banks, mortgage lenders and other creditors must be cautious when giving money to borrowers. If precautions are not taken, the lenders could end up with bad debt and other losses. The primary method used to minimize the risk of lending is by examining the borrower’s credit history. If a person’s financial past shows poor patterns, the creditor can either turn down the application or increase the interest due to the higher risk.


Credit reporting agencies are the special bureaus which are responsible for researching the credit history of individuals and even businesses. These companies collect, analyze, summarize and store all the information related to credit. When you make an application for a loan or mortgage, the pertinent lending institution will pay a fee and the agencies will provide your credit information. There are numerous credit reporting agencies in the country. However, three bureaus are of primary interest to every citizen: Equifax, Experian and TransUnion.


These agencies are not owned by the government, but they are publicly traded companies. Like other businesses, the bottom line of the operation is profit. However, there are some rules and regulations which are in place to protect consumers from exploitation. The specific federal legislation is known as Fair Credit Trading Act. This provides details on the acceptable ways to collect credit information and how the data can be traded and used.


Responsibilities of the Credit Bureaus to the Consumer

There are some responsibilities that the credit reporting agencies must fulfil to the general consumer. You should understand these roles of the company because you can reap extensive benefits with regard to financial planning. Moreover, you can avoid unexpected problems arising from credit history mishaps.


Personal Credit Report

You can obtain your personal credit report from Equifax, TransUnion and Experian on request at any time. However, you will be required to confirm your identity and the service is charged. However, there are some specific cases during which you will be given a free copy of your file. Once a year, you can get the report from a centralized website from each of the three bureaus.


If you have been an identity theft, the agencies will give you the information. People on welfare or unemployed individuals applying for jobs can get a free report. In addition, you can demand a copy of the report if a lender has taken some form of adverse action against you such as charging high interest due to the information in your file.


Investigate Your Disputes

If there is information in your credit that does not appear correct, the credit reporting agency is obligated to perform an investigation for you. However, you should note that there are cases in which your request for investigation will be denied. For example, there will be results if the information provided on the report is vague or absent. In addition, if you claim the entire credit report is wrong, your disputes will not be considered valid.


Correct Inaccurate Information

If inaccurate information is discovered in your credit history files, the pertinent bureau is responsible for corrections. Typically, your file should be corrected within thirty days after you launch your dispute. However, if you had to provide additional information, the process might take forty five days. If there is negative information which is out dated in your history, the bureau must delete it. Such data is considered out dated after seven to ten years.


Limit Access to Your File

Your credit information can be accessed by businesses through TransUnion, Equifax or Experian. However, the bureaus should limit access to your data except by companies with a reason to view your file such as loan application checks. They should also provide your credit history information to employers only with written consent. Additionally, you should have the opportunity to reject pre-screened offers.


Checking and Using Your Credit Report

You can use the credit reporting agencies to improve your financial situation. In simple terms, by understanding your personal file from the bureaus, you can maximize your credit advantage and financial future. Here are some advantages of checking and using your credit reports regularly.


Prepare for Loan Applications

When you check your credit information, you will have first-hand information on your report. Therefore, you will be prepared for a loan or mortgage application situation. There are numerous credit bullies in the lending market. If they suspect that you are not well-versed with your credit history, they will belittle your financial situation, forcing to accept unfair deals. In addition, you will be able to negotiate better loan rates for yourself if you have the right information.


Correct Bad Trends

People do not get bad credit overnight; the problems occur over a long period. Often, people are unaware of the presence of credit problems until they apply for a loan and are turned down. You can take advantage of the free annual reports provided by Equifax, Experian and TransUnion. Check for negative remarks and your general trends and make corrections. You will improve your credit and this will translate to better interest rates.


Avoid Mistakes and Fraud

The businesses and people who provide credit information are not perfect. Therefore, mistakes can happen periodically. When you check your report, you can present disputes and avoid damage to your history. Identity theft is not uncommon. Your history can keep you guarded against this issue as well as fraudulent inquiries.

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