For the most part, credit can be considered a simple and concise interaction between two entities, the creditor, and the consumer, but the system doesn’t end there. A third-party is privy to the system known as either a credit reporter or the credit bureau; playing a big role in credit history by pulling strings from behind their curtain.
Big 3 Credit Bureaus
To this day there are three credit bureaus that work on an international level. Collecting information on hundreds of millions of American consumers.
All of this collected information is provided by creditors and public information databases. The credit bureaus then collaborate all of this data into what is called a credit report, and then they sell it back to creditors and other permissible entities looking for credit history. Entities that purchase credit reports use them to evaluate if someone is creditworthy or to find out other personal information.
For more information click on the following link, Who Can Pull a Credit Report on You?
Types of Credit Reports
According to the USA.gov website, credit reports contain information that credit analysts gathered about bill payment history, loans, and current debt, among other financial material. The credit bureaus create two types of credit reports: consumer reports, and investigative consumer reports.
The consumer report is the most common type of credit report and is used by potential creditors. This report contains a record of:
- credit history
- place of employment
- social security numbers
- marital status
- all credit accounts
- when accounts were opened
- payment history
- bankruptcy filings
Everyone should check their credit report, especially when you are working on re-establishing credit it is important to verify the information for accuracy. For more information click on links to the following blogs, Why Check a Credit Report, How to Check My Credit Report, How to Dispute Credit Report Errors.
The Fair Credit Reporting Act (FCRA), is the legal guideline for credit bureaus and limits the information included in consumer reports. For any questions or concerns about information that must be excluded from consumer reports click on the following link to a pdf. of the FCRA, and look at section 605.
Investigative Consumer Reports
The investigative consumer report is entirely different than a normal consumer report. These reports are marketed and sold to potential employers, insurance companies, landlords, etc.; as detailed background checks containing personal information:
- General Reputation
- Personal Characteristics
- Mode of living
- Criminal History
- Driving Record
Section 606, of the FCRA, requires that a notice be sent in the mail asking for your permission. You must give permission before any investigation can take place or information can be gathered about you; there needs to be a written request regarding your permission. Choosing not to accept the investigation might result in a denial for whatever you were applying for that lead to a request for an investigation report.
Before You Certify a Report
After you grant permission, the credit analyst may reach out to your neighbors, creditors, colleagues, or employers, about your moral character. Think about whether or not any of them might have any negative opinions or information regarding you that will impact your report.
Section 614, of the FCRA, is about the restrictions of investigative consumer reports. No adverse information, that is not a matter of public record, may be included unless it is verified.
In general, there is an implied negative connotation associated with investigative consumer reports for various reasons: bias and inferred characterizations, used to sell the services; inaccurate or “commingled” information; and a general lack of in-depth research. However, these are opinions from wronged individuals and the practice of purchasing and selling these reports are still accepted and used.
For this reason, it is important that after you grant permission for an investigative consumer report, you check your report and dispute any incorrect information. Why Check a Credit Report, How to Check My Credit Report.