A consumer credit report is a factual record of a person’s credit payment history. It is given for a purpose allowed by law: to help a credit grantor or lender quickly and objectively figure out whether to grant you credit. A lot of the information in consumer credit reports comes straight from the companies a person does business with, but some information also comes from public records.
Credit reporting can be helpful in extreme cases, however it is often misrepresented by collection agencies that try to sell their services. When a collection agency announces a delinquent account to a credit bureau, it does not get the business any money today. On the ohet hand it provides a ‘wish’ for a payment some unknown time in the future if the debtor ever needs to do a financial transaction that involves a creditor that verifies their consumer credit report.
The problem is that credit reporting at the same time can create a liability for businesses because of collection agencies stating accounts that were not valid debts. This can open the business to legal action - a thing that no businesses needs. It has been calculated that over 41% of the data contained in consumer credit reports has errors, and with identity theft on the rise, a business must tread lightly when thinking about credit reporting.
The Fair Credit Reporting Act regulates the activities of credit reporting agencies. A credit reporting agency under this law implies that any person or business which assembles or verifies consumer credit data for the purpose of providing consumer credit reports to third parties.
According to consumer credit report laws, here are some facts that cannot be stated in consumer credit reports:
A discharge or final order in Bankruptcy Court dated more than 10 years prior to the date of the consumer credit report.
Lawsuits and judgments entered more than 7 years prior to the date of the consumer credit report.
Paid tax liens which, from the date of payment, precede the report by more than 7 years.
Accounts placed for collection or charged to profit and loss by the creditor that are dated more than 7 years before the credit report.
Records of arrest, indictment, or conviction of crime that, from date of disposition, release, or parole, precede the report by more than 7 years.
Any other adverse information that precedes the report by more than 7 years.
Out there are three major credit bureaus: Equifax, Experian, Trans Union. Federal law states how long negative data can stay on a person’s credit report. This includes late payments, accounts that the credit grantor turned over to a collection agency and judgments filed against a person in court - even if later the account was paid.
