Credit History

Your consumer credit report contains the following 4 types of information:
1. identifying information which includes your name, last known address, previous known addresses, marital status, Social Security Number, date of birth, number of dependent's, spouse's name, and employment information;
2. credit information which includes account numbers, creditors name, amount of last payment on debts, credit limit on listed accounts, and timeliness of payments on accounts;
3. public record information which includes all tax lien, court judgments and bankruptcies; and
4. inquiry section which includes all creditors, employers and others who have requested a copy of your credit report.

Many people don't know they have a credit problem until they are denied credit - such as a credit card - because of their credit history. Your credit history reflects information that your creditors have reported to credit bureaus. Credit bureaus can legally report accurate poor payment information for 7 years and for bankruptcies - 10 years. A recent study estimates that 29% of all credit reports contain serious errors and 70% of all credit reports contain mistakes of some kind.

There are no easy cures for an accurate bad credit history, so be wary of companies that claim they can erase bad credit. The Federal Trade Commission lists these warning signs of a scam "credit clinic":

• The organization guarantees to remove late payments, bankruptcies, or similar information from a credit report;
• The organization charges a lot of money to "repair" your credit;
• The company asks the consumer to write to the credit bureau and repeatedly seek verification of the same credit account information in the file, even though the information has been determined to be correct;
• The organization is reluctant to give out their address; and
• The organization pushes the consumer to make a decision immediately. These "credit repair" organizations can only erase outdated and inaccurate information, and if they can erase it, then so can you-for free or for a few dollars-with a few simple steps:

1. Request a copy of your report from a credit bureau. If you have recently been denied credit because of a poor report, the company denying credit must provide you the name of the bureau that supplied that report. Then you have 60 days to write to the credit bureau for a free copy. Otherwise, any credit bureau will send you a report for a small fee.
2. Review the report and look for genuine mistakes and outdated items - these are the only items that can be erased from a credit report.

a. If you find a genuine mistake - for example, you never made the charge, or you paid the bill on time - notify the credit bureau in writing and provide as much information as you can about what's wrong with the report. The credit bureau must then provide you with proof that the information is correct. Credit reporting companies have 30 days to verify disputed information, or they must remove it from your file and send a corrected copy of your report to anyone who received it in the last 6 months and anyone who has received it for employment purposes in the last 2 years.
b. If the information is correct, but outdated - reported more than 7 years ago or 10 years if you filed for bankruptcy - then that information must be deleted. Even if you haven't been denied credit, it's a good idea to check the report to verify that outdated information has been removed. Caveat - outdated information can still be reported for loan applications of over $150,000 e.g., a mortgage application.
c. If you still have poor credit after taking these steps, you can file a statement of up to 100 words with the credit bureau explaining your side of the story. This becomes part of your credit report, so any potential creditor has the opportunity to read any explanation of negative credit. The best prevention for a poor credit report is to pay bills that aren't in dispute, and report disputed bills to your creditor in writing as soon as you receive a statement showing the disputed bill.

Although creditors may not discriminate on the basis of national origin, they may consider your immigration status when making a loan decision.

On your first attempt to get credit, you may face a common frustration: sometimes it seems you have to already have credit to get credit. Some creditors will look only at your salary and job and the other financial information that you put on the application. But most also want to know about your track record in handling credit, namely, how reliably you've repaid past debts. They turn to the records kept by credit bureaus or credit-reporting agencies, whose business is to collect, store, and report information about borrowers that is routinely supplied by many lenders. These records include the amount of credit you have received and how faithfully you've repaid.

Here are several ways you can begin to build a good credit history:

• Open a checking account or a savings account or both. These do not begin your credit file but may be checked as evidence that you have money and know how to manage it. Cancelled checks can be used to show that you pay utilities or rent bills regularly, a sign of reliability.
• Apply for a department store credit card. Repaying credit card bills on time is a plus in credit histories.
• Ask whether you may deposit funds with a financial institution to serve as collateral for a credit card; some institutions will issue a credit card with a credit limit usually no greater than the amount on deposit.
• If you're new in town, write for a summary of any credit record kept by a credit bureau in your former town. (Ask the bank or department store in your old hometown for the name of the agency it reports to.)
• If you don't qualify on the basis of your own credit standing, offer to have someone cosign your application.
• If you're turned down, find out why and try to resolve any misunderstandings.

The following laws can help you start your credit history and keep your record accurate:

• THE EQUAL CREDIT OPPORTUNITY ACT gives women a way to start their own credit history and identity.
• THE FAIR CREDIT REPORTING ACT sets up a procedure for correcting mistakes on your credit record.

Under the Equal Credit Opportunity Act, reports to credit bureaus must be made in the names of both husband and wife if both use an account or are responsible for repaying the debt. Some women who are divorced or widowed may not have separate credit histories because their credit accounts were listed only in their husbands names. But divorced and widowed women can still benefit from such a record. Under the Equal Credit Opportunity Act, creditors must consider the credit history of accounts women have held jointly with their husbands. Creditors must also look at the record of any account held only in the husband's name if a woman can show that it also reflects her own creditworthiness. If the record is unfavorable for example, if an ex-husband is a bad credit risk she can try to show that the record does not reflect her own creditworthiness. Remember that a wife may also open her own account to ensure starting her own credit history.

Example:
Mary Jones, when married to John Jones, always paid their credit card bills on time from their joint checking account. But the card was issued in John's name, and the credit bureau kept all records in John's name. Now Mary is a widow and wants to take out a new card, but she's told she has no credit history. To benefit from the good credit record already established in John's name, Mary should point out that she handled all accounts properly when she was married and that bills were paid by checks from their joint checking account.

Mistakes on your credit record can cloud your credit future. Your credit rating is important, so be sure that credit-bureau records are complete and accurate.

The Fair Credit Reporting Act says that you must be told what's in your credit file and have any errors corrected.

Negative Information
If a lender refuses you credit because of unfavorable information in your credit report, you have a right to get the name and address of the agency that keeps your report. Then, you may either request information from the credit bureau by mail or in person. You may not get an exact copy of the file, but you will learn what's in the report. The law also says that the credit bureau must help you interpret the data in the report because the raw data may take experience to analyze. If you're questioning a credit refusal made within the past 60 days, the bureau cannot charge a fee for giving you information.

If you notify the bureau about an error, generally the bureau must investigate and resolve the dispute within 30 days after receiving your notice. The bureau will contact the creditor who supplied the data and remove any information that is incomplete or inaccurate from your credit file. If you disagree with the findings, you can file a short statement (100 words) in your record, giving your side of the story. Future reports to creditors must include this statement or a summary of it.

Old Information
Sometimes credit information is too old to give a good picture of your financial reputation. There is a limit on how long certain information may be kept in your file:

• Bankruptcies must not be reported after 10 years. However, information about any bankruptcies at any time may be reported if you apply for life insurance with a face value over $150,000, for a job paying $75,000 or more, or for credit with a principal amount of $150,000 or more.
• Suits and judgments paid, tax liens, and most other kinds of unfavorable information must not be reported after 7 years.

Your credit record may not be given to anyone who does not have a legitimate business need for it. Stores to which you are applying for credit may examine your record; curious neighbors may not. Prospective employers may examine your record with your permission.

Billing Mistakes
In the next chapter, you will find the steps to take if there's an error on your bill. By following these steps, you can protect your credit rating.