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What is a Credit Reporting Bureau?
A credit report is information that a credit bureau holds on you. This information can be used to get background checks, rental history, employment history, and even medical records. It’s a potent tool that can help you make crucial decisions. It can also help you get a job.
Background Checks
Background checks are an essential part of the hiring and firing processes. These reports are required by law and allow employers to know potential employees’ personal and financial histories.
They can also save employers from legal issues. The Consumer Financial Protection Bureau regulates consumer reporting agencies. However, the process of obtaining information is not entirely free of risks.
To protect consumers, employers must not abuse the information in these reports. They must inform applicants about the report and get their consent to use the information. They also must let the applicant know if they are not hired. They should also tell the applicant that they can dispute the report.
The notice of the background check must be on a separate form. It should contain the authorization for the check and the person’s identifying information. The form should not contain questions about race, gender, full date of birth, or maiden name. Such questions violate federal Equal Employment Opportunity laws.
Rental History
Historically, rent payments were not reported to credit bureaus, so they would not affect your score. However, lenders realize that on-time rent payments can help establish your reputation as a reliable borrower.
This makes rental payment history a valuable tool for people who don’t have much credit history or want to repair their credit history.
You are giving yourself a significant boost by reporting your rent payments to the credit bureaus. This information can help you get better interest rates and access the best financing deals. It is also a great way to protect your credit score if you rent an apartment.
Credit score calculations include the details of your credit accounts, also known as trade lines. These records list your account, including credit limits, co-signers, balances, and payment histories.
Rental payments are included in your payment history, which is about 35% of your total score. Although rental payments aren’t a significant factor in your FICO score, they significantly impact your credit report.
Employment History
One of the things that can confuse your credit report is whether the Employment history on your report is accurate. While most employers do not use employment history to make hiring decisions, it is worth checking for discrepancies. For example, if there is a pattern of late payments on your report, that could raise red flags for potential employers.
You can contact the credit reporting bureau to get your credit report corrected. The agency will provide you with a copy of your report. Once you have a report copy, you can dispute the information if you believe it is inaccurate. You can also file a complaint if your employer has violated the law.
You can do so by writing or electronically to the Division of Consumer Affairs. To file a complaint, you must identify yourself and state your employer’s name and address. The agency will not accept anonymous complaints from individuals who have not been directly affected by the employer’s actions.
Using a credit report for employment purposes can be problematic for many people. An employment report may contain information about credit inquiries, past employment, and other vital details.
However, it is important to note that an employment credit report does not include a credit score. In addition, under the Fair Credit Reporting Act, employers must disclose the information and gain consent from employees before using it for any purpose. This information is often used to prevent fraud or money laundering.
Medical Records
The three major credit reporting bureaus are set to make significant changes in their use of medical debt on consumer credit reports.
Beginning July 1, 2022, all medical debt paid will be removed from credit reports. In the interim, collections with a total balance of $500 or less will remain on consumer reports for a year.
From 2023 onward, medical debts of less than $500 will not appear on credit reports. This change will affect nearly 70% of medical debts on consumer credit reports.
A medical bill can affect your credit score in many ways, including your ability to get insurance, obtain housing, and even get a job. Almost one in ten American adults has medical debt that is more than $250, according to the CFPB. However, most medical debt is less than $500.
Medical debts can damage your credit score and push you into bankruptcy. However, the three credit reporting bureaus have pledged to remove negative medical debts from credit reports. This could make it easier to access jobs, apartments, and credit.
Insurance History
As a consumer, it’s essential to understand how insurance companies use credit history to determine your rates. For instance, under the Fair Credit Reporting Act, you can obtain a free copy of your personal claims history. This information can help you compare insurance policies, as insurance companies report all claims.
But your insurance score can suffer if your credit report contains inaccurate information. This can lower your score or even raise your premium.
It’s essential to keep in mind that the three major credit bureaus report information differently. Even if the information is accurate, incomplete, or outdated, it can still hurt your score.
Your credit score can help insurance companies determine if you’re a good candidate or a risky driver. However, it’s only one factor among many that insurance companies consider when determining your rate.
Other factors include the operator’s age, the model and age of the car, and the number of miles you drive per year. If you’re unsure whether your insurance company is using your credit-based insurance score, ask them about the risk category you fall into and your payment history and outstanding debt.
Financial Institutions That Report to Credit Bureaus
A credit bureau is an organization that collects personal information about a person’s creditworthiness and sells it to other lenders and potential creditors. The United States has three major bureaus: Equifax, Experian, and TransUnion.
The bureaus collect data on everything from your credit history to debt collections. The Fair Credit Reporting Act regulates them.
To report to the credit bureaus, a creditor must follow specific guidelines. First, it should report every month on a specific date during the billing cycle.
While it’s recommended to report once per month, credit card companies spread out the dates so that they don’t have to produce every customer’s statement on the same day. This benefits consumers, as late payments can harm their credit scores.
The credit bureau also collects information from other sources, such as banks and lending institutions. Using this information, the bureaus can identify a person’s financial history, including past financial lawsuits, asset seizures, public services, and memberships.
In addition, bureaus can purchase information from other credit bureaus. This information makes credit bureaus incredibly powerful institutions.
Free Copies of Credit Reports
The federal Fair Credit Reporting Act requires all three major credit reporting bureaus to give consumers free copies of their credit reports once a year. The reports contain information about consumers’ creditworthiness and are used by businesses to make lending decisions.
The reports are available on their websites and can be obtained by filling out a form. The form asks for your name, birthdate, current address, and SSN. You will also need to provide your previous address if you do not live at your current address.
In most cases, a credit report will contain the details of any adverse action taken against you. The action could be anything from denying an insurance application to denying employment or credit.
The notice will also include the name of the credit reporting company and contact information. It will also list any inaccuracies in your personal information or bankruptcies that may have occurred. Potential negative entries may include inaccurate addresses, unpaid debts on accounts you never opened, and inaccurate public records.
It is a good idea to review your report periodically to ensure its information is accurate and free of errors. The Attorney General’s Office recommends you review your free credit report at least once a year to detect errors, late payments, and other transactions that could damage your credit rating.