Frequently Asked Questions About Credit

What is Credit?

Credit is one’s ability to borrow funds from a lending facility and a recording of their payment history and Lenders then gage how likely a consumer will repay future loans or credit cards.

What is a Credit Report?

A credit report is a written document of the creditor(s) verified history of a consumer. Lenders and other sources provide information on payment histories, liens and judgments as recorded in any public repository and placed on consumer’s credit reports.

What is a Credit Bureau?

Credit Reporting Bureaus are companies that collect and distribute all of the reported credit information and credit histories about consumers. They are credit information data warehouses that store consumers credit files.

What is Credit Scoring?

A credit score is a numerical expression derived from a statistical analysis of a person's credit files. The credit bureaus compile information about consumers credit payment histories in their databases. Most creditors use credit scores to decide to issue credit instead of reviewing everything in the credit reports. The computer program looks for payment patterns, payment history, characteristics and flags in a consumer’s credit history and creates a credit score.

This system was developed by lenders, such as banks and credit card companies who use credit scores to evaluate the potential risk posed by lending money to people and to mitigate losses due to bad debt.

Why is Credit Used?

Credit is used by lenders as well as other creditors for making lending decisions. Credit reports and credit scores are also used in many other areas of consumer lives. In addition to lending decisions, credit is also used for insurance and employment approvals.

How do I get a Free Credit Report?

Consumers are entitled to one free credit report each year. Simply go to the web site to get your free report today. You are also eligible for a free report if you were rejected for a loan. By request of the Federal Government the three nationwide credit reporting bureaus have created a centralized web site as a resource for consumers to get free credit reports once a year.

What are my rights under the Fair Consumer Reporting Act?

Everyone has the right to have an accurate credit report. If there is information on a credit report that is not accurate it is not legal. This law is designed to protect consumers from inaccurate information hurting their chance at positive credit.