Financial Education: Your Credit

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Credit Reporting Agencies

Lenders generally check your credit report to decide whether to offer you a loan. The lender uses companies called credit reporting agencies. There are three major credit reporting agencies. They are:

Credit Reporting Agencies
Equifax
P.O. Box 740241
1150 Lake Hearn Drive
Suite 460
Atlanta, GA 30374
800-685-1111
Experian
701 Experian Parkway
P.O. Box 2002
Allen, TX 75013-0036
888-397-3742
TransUnion
Two Baldwin Place
P.O. Box 1000
Chester, PA 19022
800-888-4213


Credit reporting agencies receive information from a variety of creditors, usually monthly, about whether you and other customers are making loan payments on time.

Information about bankruptcy filings, court-ordered judgments, tax liens and other public record information is collected by agencies from courthouse records.

Here is an example of three potential borrowers, each with a different credit history. If you were the lender, determine which borrower you would consider to be the most risky.

Bob has been working for several years and has never applied for a loan. Bob has no credit history.

Michael has been working for several years. He has been late on making his car payments and recently stopped paying on them altogether. There is a tax lien on his house.

David has been working for several years. He took out a car loan last year. He has been making the payments on time and has a good credit history.

Based on this information alone, if you were a banker, which applicant poses the most risk?

Both Bob and Michael would be considered risky. Michael has a poor credit record and has not paid his loans. Bob, on the other hand, has no history, so we don't know what kind of borrower he would be.

The credit report is an important factor, but not the only consideration in making a credit decision.

Lenders might use a credit score to help decide whether to make a loan. A credit score is a tool that helps lenders assess your credit risk. The score is based on information contained in your credit report.

Keep in mind that credit reporting agencies do not make credit decisions. Credit reporting agencies simply report the information provided by creditors. This information helps lenders make loan decisions.

Lenders have different requirements for approving loans. Their decision might be based on other factors such as:

• Income
• Length of Residence
• Employment


Your credit report can also be viewed by other organizations with a legitimate business need. For example, your employer, insurance agent, or apartment manager can view your credit report. A poor credit history might affect your ability to get a job, be approved for insurance, or rent an apartment.