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There are a lot of financial risks associated with lending money to individuals. Therefore, commercial institutions such as banks, mortgage lenders, and other creditors should exercise caution when giving money to borrowers. If precautions are not taken, lenders could end up with bad debts and other losses. The main method used to minimize loan risk is to review the borrower’s credit history. If a person’s financial past shows bad trends, the creditor may deny the claim or increase the interest due to the higher risk.
Credit bureaus are the special bureaus that are responsible for researching the credit history of individuals and even businesses. These companies collect, analyze, synthesize and store all information relating to credit. When you apply for a loan or mortgage, the relevant lending institution will pay a fee and the agencies will provide you with your credit information. There are many credit reporting agencies in the country. However, three offices are of primary interest to every citizen: Equifax, Experian and TransUnion.
These agencies are not government owned, but they are publicly traded companies. Like other businesses, the bottom line is profit. However, certain rules and regulations are in place to protect consumers from exploitation. The specific federal legislation is known as the Fair Credit Trading Act. This provides details on the acceptable ways to collect credit information and how the data can be exchanged and used.
Responsibilities of credit bureaus to consumers
Credit bureaus must fulfill certain responsibilities to the general consumer. You need to understand these business roles because you can reap tremendous benefits in financial planning. Plus, you can avoid unexpected problems resulting from credit crashes.
Personal credit report
You can get your personal credit report from Equifax, TransUnion, and Experian on demand at any time. However, you will need to confirm your identity and the service is charged. However, in certain specific cases, you will receive a free copy of your file. Once a year, you can get the report on a centralized website from each of the three offices.
If you have been a victim of identity theft, the agencies will give you the information. Social assistance recipients or unemployed people applying for a job can get a free report. Additionally, you can demand a copy of the report if a lender has taken any form of adverse action against you, such as charging high interest because of the information in your file.
Investigate your disputes
If there is any information in your credit that does not appear to be correct, the credit reporting agency is under an obligation to investigate for you. However, you should note that there are cases in which your inquiry request will be denied. For example, there will be results if the information provided in the report is vague or missing. Additionally, if you claim that the entire credit report is wrong, your disputes will not be considered valid.
Correct inaccurate information
If inaccurate information is discovered in your credit history files, the relevant office is responsible for the corrections. As a general rule, your case must be corrected within thirty days of the initiation of your dispute. However, if you were to provide additional information, the process could take forty-five days. If there is negative information that is outdated in your history, the office should remove it. These data are considered outdated after seven to ten years.
Limit access to your file
Businesses can access your credit information through TransUnion, Equifax, or Experian. However, bureaus should limit access to your data, except for businesses that have a reason to view your file, such as loan application reviews. They should also provide your credit history to employers only with written consent. In addition, you should have the option of rejecting shortlisted offers.
Checking and Using Your Credit Report
You can use credit reporting agencies to improve your financial situation. Simply put, by understanding your personal file from the offices, you can maximize your credit advantage and your financial future. Here are some benefits of regularly checking and using your credit reports.
Prepare for loan applications
When you verify your credit information, you will have first hand information on your report. Therefore, you will be ready for any loan or mortgage application situation. There are many credit bullies in the loan market. If they suspect that you don’t know your credit history well, they will belittle your financial situation, forcing them to accept unfair deals. In addition, you will be able to negotiate better credit rates for yourself if you have the right information.
Correct bad trends
People don’t get bad credit overnight; problems arise over a long period of time. Often people are not aware of the presence of credit problems until they apply for a loan and are turned down. You can take advantage of free annual reports provided by Equifax, Experian, and TransUnion. Check negative remarks and general trends and make corrections. You will improve your credit and this will result in better interest rates.
Avoid mistakes and fraud
Companies and people who provide credit information are not perfect. Therefore, errors may occur periodically. When you check your report, you can present disputes and avoid damaging your history. Identity theft is not uncommon. Your history can protect you against this problem as well as against fraudulent surveys.
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