Credit Reporting Agencies

Fiscal Fitness Part II — Understanding the “Big Three” Credit Reporting Agencies

This second article in our Fiscal Fitness series outlines the basics of how the “big three” credit reporting agencies (CRAs) work. Understanding how CRAs impact your credit score is another great step to take in keeping your credit in shape.

1. Who are the credit reporting agencies?

The three largest U.S. credit reporting agencies— Experian, TransUnion and Equifax — are known as the “big three.” Their two-fold function is to collect information about consumers and report it to lending institutions and other creditors upon request. CRAs are mysterious entities to many consumers. You know they exist and how they can affect you. But how can you work with them and take an active role in maintaining a good credit score?

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Your credit score and housing

Planning to Rent a House or Apartment? Check Your Credit Report First

Your credit score can affect your life in ways you may not have considered. Beyond its impact on your ability to get a loan or a mortgage, your credit score can be a determining factor in renting a house or apartment. Whereas landlords used to rely on their instincts when deciding whether or not to rent to you, online tenant screening programs have now made it easy and affordable to conduct tenant background checks that generally include a credit report. Primarily they are looking for negative entries that show you may not be a responsible tenant in terms of keeping up with monthly payments, such as rent. They will also check to ensure that the name, current address and employer listed on your rental application match what is on your credit report.

If you want to make a good impression on a potential landlord, you should start by getting your credit report in order.

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how credit affects employment

How Your Credit History Can Impact Your Job Search

Most consumers are aware that having a good credit report is extremely important if they decide to apply for a loan or mortgage. What many people don’t know is that their credit history can also be a determining factor in getting a job or promotion.

Federal laws allow potential and current employers to view a modified version of your credit report for purposes of hiring and promoting. This can be unnerving to people who have been unemployed or have a less-than-stellar credit history. In fact, there’s a push to outlaw pre-employment credit checks, and some states have already banned or limited them.

Job applicants also have rights when it comes to this practice. It’s helpful to understand your rights and how to work within them. The good news is that employers must have your prior written authorization before they can request your credit report, and the report they receive won’t include your account numbers, year of birth or references to your spouse. Furthermore, if you are denied a job because of a negative credit report, the company is required by law to give you a copy of the report along with a written description of your rights.

Many consumers are aware that multiple inquiries by creditors into their credit history can affect their creditworthiness if those inquiries are seen by potential lenders. However, credit inquiries made for employment purposes are considered “soft inquiries” and are not shown to lenders.

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Today’s credit – a whole new ball game

The CARD Act signed by President Obama in 2009, was designed to protect consumers from unexpected increases in interest rates, decreases in credit lines, and other changes in the services offered by credit card issuers.

Though our economy continues to show signs of improvement, the bottom line is that, because of the recent recession, slower than expected recovery and the resulting changes in bank policies and government legislation, the credit landscape has changed forever. Gone are the days of “easy credit” where almost anyone could qualify for a credit line for almost anything. Credit issuers now operate by an entirely new set of rules.

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