Credit Reporting 101 - What You Need to Know
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Back to School: Credit Reporting 101
This year, it's not just the kids who are heading back to school-TrueCredit is giving you a session of Credit Reporting 101. We tackled Credit Scoring 101 in July; now let's take on the fundamentals of the credit reporting system. From the big three credit reporting agencies to your rights under the Fair Credit Reporting Act, this course will help you navigate the credit reporting maze.
The Credit Reporting Agencies - TransUnion, Equifax and Experian (formerly TRW) are the three national credit reporting agencies that keep records on consumers. The reporting agencies work with lenders, creditors, insurers and employers to update and distribute your information to the appropriate institutions. Here's an example of how the system works:
Your Credit Report - Your credit report is divided into six main sections: consumer information (address, birthday and employment), consumer statement, account histories, public records, inquiries and creditor contacts. When you open a new account, miss a payment or move, these sections are updated with new information. The old records will stay on your credit report for about 7 years. Not all creditors report to all three agencies and the agencies don't share their data so your reports from TransUnion, Equifax and Experian could be substantially different from each other. That's why it's important to check your three credit reports every few months to ensure that the information is accurate and up-to-date.
Correcting Inaccuracies - Under the Fair Credit Reporting Act, consumers are protected from having inaccurate information on their credit reports. If you find an inaccurate record on your report, try contacting the creditor or lender associated with the mark first. These companies can usually correct the mistake and send an update to the credit reporting agencies. If you can't make progress this way, you can also dispute the inaccuracy directly with the credit reporting agencies.
Working the System - Keeping your credit reports healthy will improve your credit scores and help get you the best rates on major purchases. We recommend that you check your credit reports every 3-6 months in order to guard against damaging inaccuracies and identity fraud. Routine check-ups along with paying your bills on time, keeping your credit card balances below 35% of their limits and correcting any negative inaccuracies will help you maintain a healthy credit profile.
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