Hi, my name is John Ulzheimer and I am a credit expert who contributes to
CreditCardInsider.com and today's question is this: How do the credit
reporting agencies get and keep your information? That's an excellent question
that's something that not a lot of consumers are privy and understand how
this information actually makes it from your bank all the way to the credit
reporting agencies. Believe it or not, it is an entirely voluntary system. There is
no requirement for any bank, credit card issuer, mortgage lender, student loan
lender, to send any of your information to any credit reporting agency at any time.
They choose to do so, and the reason they choose to do so is because the carrot and
the stick, right? I mean if your information is going to be reported to
a credit reporting agency for all to see
then the hypothesis is that you're more likely to manage the account properly
and pay your bills on time. The credit reporting agencies essentially act as
massive data warehouses and they will gladly accept information from what's
referred to as a "data furnisher," and a data furnisher in almost every single
scenario is going to either be a collection agency or some sort of a
financial institution like an auto lender, or a credit card issuer. The credit
reporting agencies do not pay any bank to report information to them, however
they make money because they're taking this information and homogenizing it and
combining with the information sent to them by other banks to create this
credit report about you and then they take that information and they sell it to
other lenders, to insurance companies, to utility companies, to employers, to you in
some cases if you want to get a copy of your own report and you end up buying it. So it's a very
interesting business model. They have very low cost of goods and they take this information and
then turn right around and sell it back to people who gave them the information
at no cost in the beginning. The minute something is reported to the credit
reporting agencies you have a considerable amount of rights under the
Fair Credit Reporting Act.
The information has to be accurate and if you do not believe that it is
accurate you have the right to challenge the information with the reporting
agency and their obligation, because they are keeping your information, is to
perform a reasonable investigation if you challenge some aspect of the account
that they're maintaining. So you may challenge whether or not it's yours, you can
challenge the balance. If it has some sort of derogatory account history associated
with it you can certainly challenge that information, and when you do challenge this
information, the credit reporting agencies will then contact the
furnishing party, again either a bank or a collection agency, and they'll basically
ask them "Hey look we got a dispute from John, he's saying the balance is incorrect,
can you please verify the current balance?" and then the bank also has an obligation
to perform a reasonable investigation and then send back a correction if one
is warranted. And then the credit bureaus, as the stewards of the information, have to
update the file and then send you a copy of the report. And all of these things
that I just went through are free. There's no cost involved with doing any of this. You
can do it on your own at no cost at all.
Most companies do choose to report your information to the reporting agencies,
but because it is a voluntary system there's no guarantee that they're going
to do so, and if they do, there's no guarantee that they're going to report to all three of
the reporting agencies: TransUnion, Experian, and Equifax. There are many scenarios where a
financial institution may just choose to report to one of them, or may choose just report to two
of them, but not choose to report to all three of them. If you're going to report
something to a credit bureau you have to have an account with them. It's not just the wild wild west where
people are sending information into the bureaus and the bureaus are posting it
on your report. You actually have to have a contract and an active account and
essentially certify that you're a valid service provider, that you have
permission under the Fair Credit Reporting Act to pull credit reports and you're going to
comply with the obligations of the Act if you do choose to send information
to the bureaus. So it's not a simple as just anybody can report information like,
for example, you're living in someone's house and they're renting a room to you, and
you miss your rent for one month, they just can't pick up a phone and call a credit
bureau and stick that on your credit report, it's considerably more complicated than that.
And, of course, you as the consumer, have the right to see what's on that report
whenever you want to see it. You can go to annualcreditreport.com and pull a copy
of it. You can pull it from all three reporting agencies once every 12 months at no cost.
There are also a variety of other websites that will gladly give you a
credit report at no cost, as well. Depending on what state you live in there may
actually be some state rights that you've got that will give you additional free copies of
your credit reports annually rather than just the one copy you get pursuant to
federal law at annualcreditreport.com. Point being is that you should be engaged
with the information on your report because it is a voluntary system. You
never really know what's going to be on it until you actually pull it and see it,
and really the only way for the reporting agencies to know that
something is wrong is for you to tell them "Hey look, something on my report is
wrong, please go ahead and correct it." So if you have any other questions pertaining to credit
or financial topics, then please submit them to Credit Card Insider or in the
comments section below. Thanks for watching, and have a nice day.