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Credit Reporting: How Does It Work?
In order to determine a consumer's credit worthiness,
creditors and lending institutions have come to depend on credit
reporting agencies. Credit reporting agencies supply individual
reports that provide consumer specific information for lending
purposes. With the advent of technology, most creditors now have
automated systems that provide them direct access to credit
reporting agencies. In most cases, credit agencies or credit
bureaus provide personal, legal, and account history related
information. In recent years it has become more common for
lending institutions to use multiple credit reports to meet
lending requirements. Besides meeting lending requirements,
multiple reports also provide additional security measures. Using
multiple sources for reporting purposes provides a more
comprehensive and complete background check on a consumer's
credit and spending history.
Traditionally, when a consumer submits a credit application,
creditors forward that information to the credit reporting
agencies. This is how credit reporting agencies are able to
accumulate personal information on people. This information often
includes items such as the consumer's name, address, social
security number, employment information, marital status,
telephone number, and possibly income. By utilizing credit
reports, lending institutions are able to cross-reference the
information that a consumer provides on a credit application with
the information that the credit reporting agencies have on file.
Some credit reporting agencies even hire companies and or
contractors to research and verify that the information entered
on a consumer's credit application is accurate and
verifiable.
Most credit accounts, on a monthly basis, are reported to
credit reporting agencies; these reports will reflect a payment
and account history for all credit related accounts. The
information that a credit reporting agency provides is known to
as a tradeline. On a credit report, there is traditionally a
tradeline for every creditor that reports account information to
the bureaus.
As I mentioned earlier, not all lending institutions report to
the credit bureaus; however, most do. The major credit bureaus
provide reports which include a consumer's payment history in
30-day intervals. This is due to the fact that most consumer
billing cycles follow a similar payment pattern. Most lending
institutions have a proprietary set of rules and guidelines that
govern the thresholds at which they report consumers as being
delinquent in their payments. It has been my experience that some
lenders have gone as far as not report delinquency until the
consumer's account reaches 60 days past due. Other lenders are
much stricter in their guidelines and will report delinquency at
30 days past due. Traditionally, a credit report will provide a
detailed summary of any delinquency you have had with your
creditors. This is measured by the number of times that you
fallen more than 30, 60, 90, and 120 days past due. Many of these
credit reports use a rating system that assigns a specific status
code to each 30-day period of missed payments.
In the consumer lending industry, this method is often
referred to as the simple method. For example, an R-1 rating
represents a consumer account that is current or an account that
was paid properly and that is in good standing; an R-2 rating
indicates that payments were paid 30 days or more after the due
date but less than 60 days after the original due date; an R-3
rating represents that the bill was paid 60 or more days after
the original due date but is less than 90 days past due; an R-4
rating shows that a consumer has fallen 90 or more days past due
but is less than 120 days delinquent; an R-5 rating indicates
that a consumer has fallen 120 or more days past their original
due date; an R-7 rating shows that a creditor was forced to
repossess collateral on the account and an R-8 rating means that
the account was referred to collections in an attempt to recoup
payment. The rating of R-9 is traditionally used to show that a
debt or debts have been discharged through bankruptcy, have been
repossessed or foreclosed upon, or are currently in
collections.
Alan Barnes IAPDA Certified Debt Arbitrator and President and
CEO of Debt Regret, Inc. http://www.debtregret.com
MORE RESOURCES:
MORE COLLEGE CREDITChicago Sun-Times, United States - 11 hours agoDespite the current nationwide credit crunch, the State of Illinois secured $100 million for the student loans by tapping a new source -- credit unions. ... |
Credit repair is a DIY projectBaltimore Sun, United States - 2 minutes agoBy Gail MarksJarvis | chicago tribune Mike Ferrara wants to buy a house in a few months and is worried that mistakes on his credit report will keep him from ... |
Ask, and you might receive a lower credit-card rateSeattle Times, United States - 19 minutes agoPick up the phone, look at the latest credit-card offers and keep repeating this: The bank needs me more than I need it. By Susan Tompor Pick up the phone, ... |
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