Credit Bureaus

In the United States, the bigger credit bureaus are Equifax, Experian, and TransUnion. Credit bureaus are credit reporting agencies that provide credit reports and credit profiles for individuals. A credit report usually contains five categories of information. The first category is known as the “identity information”. It shows the person’s name, aliases, addresses (current and previous), social security number, and sometimes, marital status.

The second category is known as the “credit line”. It shows the various credit lines or credit accounts that are available to a certain individual. These can be revolving credit accounts (indicated by “R”), which includes credit lines in department stores and credit unions, or they can be installment accounts (indicated by “I”) such as auto loans, or they can be mortgage accounts (indicated by “M”) such as the home mortgage.

The credit report will show credit ratings such as R0, R1, up to R9. The R0 rating means that there is insufficient information about the individual. The R1 rating means that the individual is a borrower in good standing. And ratings of R2 to R9 mean that the individual is not creditworthy.

Fortunately, most creditors do not look into the second category of the credit report. They focus on the third category which is referred to as the “collection accounts”. The entries in the collection accounts are made by collection agencies that have been hired to pursue individuals who have been delinquent in paying their bills. Therefore, the existence of the collection accounts in the credit report is regarded by creditors as indicators of late payments or non-payments.

The fourth and fifth categories of information in the credit reports provided by credit bureaus are “court records” and “inquiries”. The court records include declarations of bankruptcies, judgments, liens, and even divorces. Without delving into the details of a court decision, most creditors consider the existence of court records as a negative sign.

The inquiries reflect the number of times that an individual’s credit report has been checked. When an individual applies for a credit card or a loan, his credit report is accessed by the creditor. This means that if an individual applies for numerous credit cards, his credit report will show too many inquiries. Some creditors regard this as a sign that the individual is in financial trouble. Regrettably, more and more people are allowed to inquire about a person’s credit history, such as auto insurance companies, employers, and even landlords.

Credit bureaus, despite the vital role that their credit reports play in the professional and personal life of an individual, do not create such reports based on their own investigations. The credit bureaus based the credit reports and credit profiles on the reports submitted by creditors. Some creditors submit reports to all credit bureaus while others send reports only to one or two credit bureaus. This is why the credit report of one credit bureau might be slightly different from the credit report made by another.

 How often do creditors report to the credit bureaus?

Creditors are required to regularly send reports to credit bureaus. Some of them file reports once a month while others provide one report in every two months. Thus, it is normal to expect that a credit report may still reflect a collection account that has been paid a month ago. But even though the credit report is delayed by 60 days, it is still considered as timely or updated.

Reporting bad debts to credit bureaus

Obviously, credit bureaus have a close relationship with creditors. The credit bureaus depend on the reports given by creditors in order to build a credit profile of an individual. At the same time, the creditors depend on the credit reports from credit bureaus to determine the creditworthiness of a potential borrower.

A person with bad debts is immediately reported to the credit bureau and such a person will find it very challenging to obtain approval for subsequent loan applications. However, the consumers are protected by the FCRA or the Fair Credit Reporting Act. Individuals can obtain a copy of their credit reports and dispute any inaccurate information in it. For Equifax, the number to call to report fraud is 800-525-6285; for Experian, the number is 888-397-3742; and for TransUnion, the number is 800-680-7289.

Bad debts do not mean the total destruction of an individual’s finances. There are many ways to recover and to start again. It is also a relief to know that records of bad debt stay in the credit report for a maximum of seven years, court records of bankruptcy stay for ten years, and inquiries are kept only for two years.