Your credit history is a compilation of your current and past debts, accounts, personal information and public records. The credit bureaus use your credit history to generate both your credit report and credit score. Thus, your debt management skills can directly impact your credit and, in turn, your future buying power.
Facts
Your creditors report your accounts, debts and payments to the credit bureaus using computer software. According to The Service Bureau, a provider of the Metro 2 credit reporting software, creditors wishing to report their accounts must first gain membership in the credit bureaus' reporting programs before uploading consumer data. Public records within your credit history, such as foreclosures and bankruptcies, are not reported by creditors. The credit bureaus access these records by searching regularly updated legal databases and transferring relevant information to your credit file.
Significance
The Fair Credit Reporting Act (FCRA) requires that all creditors make an honest effort to report only accurate and verifiable information to the credit bureaus. Because your credit history can have such a substantial impact on your life and your finances, inaccurate credit reporting is against the law. Individuals who feel that accounts appearing within their credit history are inaccurate have the legal right to dispute the validity of the information with both the original creditor and the credit bureaus.
Time Frame
Various features of your credit history can only be reported on your credit report for a limited amount of time before they become obsolete. The FCRA dictates that the credit bureaus must remove obsolete items within each consumer's credit history. In addition, the FCRA also establishes an acceptable time frame for entries to remain on your credit report. A credit card charge-off, for example, must be removed seven and a half years from the date you originally stopped making payments on the card. If you file for bankruptcy, however, that entry can be reported within your credit history for ten years.
Considerations
If creditors are reporting negative information such as late payments and collection accounts, you may be able to negotiate the way your debts are reported in order to improve your credit score. One method of negotiating with a creditor is to send a goodwill letter requesting that the creditor delete late payment notations due to your otherwise positive payment history or your long history as a customer. Another common method is "pay for delete" in which you can request that a creditor, usually a collection agency, remove negative information from your credit report in exchange for full payment of the amount you owe.
Misconceptions
Your credit history--and the way it's reported by your creditors--may differ depending on the credit bureau receiving the reports. The Fair Isaac Corporation reports on its website, myFICO.com, that not all creditors submit reports to all three credit bureaus. Thus, your credit history may differ depending on which credit bureau a potential lender uses to pull your credit report. Some lenders use specialized "tri-bureau" reports that combine your credit history from all three credit bureaus to ensure that all of your financial information is available for review.
References
- The Service Bureau: Metro 2 Credit Reporting Software
- NOLO: Rebuilding Credit FAQ
- Federal Trade Commission: The Fair Credit Reporting Act (section 611/605)
- Rinne Legal: Rebuilding Your Life After Bankruptcy - How To Fix Your Credit
- MyFICO.com: Why Are My Scores Different for the Three Credit Bureaus?
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