Reporting bad credit
In countries like U.S, Canada, UK etc, there are specialized credit bureaus that maintain the repayment behavior of a person and provide credit rating accordingly. Credit rating or credit scores are considered very important as lending institutions like banks, credit card companies, mortgage companies, etc take decision on the basis of credit rating only. If a person is suffering from bad credit, i.e. has low credit scores, either credit facility is denied or is provided at high interest rates. People with low credit scores are exploited by the lending institutions in various other forms also. Bad credit reporting is done so as per the stipulated processes.
Through bad credit reporting, a lender can easily minimize the risk attached with lending of different types of credit facilities. Bad credit reporting also enables lending institutions in examining the credit history of borrower. It is important to note here that if a person has ever taken any type of loan or has applied for a loan, he has credit history and it is considered good or bad as per the repayment behavior adopted. For the purpose of bad credit reporting, essential information is collected by the credit bureaus or reporting agencies from credit card companies, mortgage companies, banks, and all other types of creditors. Thus, these institutions play a very important role in bad credit reporting and in depth credit report of a person is prepared through this reporting only.
Three digit credit scores are also calculated from this information and are used in bad credit reporting. Upon lending institution making a request for the credit history or score of a person, credit reporting agencies provide desired information and decision is then arrived at. Since there are more than one credit reporting agencies, one or all of them can be contacted by lending institution for the purpose of bad credit reporting.
Credit reporting agencies or credit bureaus are considered as powerful institutions as one bad entry made by these agencies can affect the borrowing powers of a person for many coming years. Apart from lending institutions, credit bureaus are also approached by landlords, employers and insurance companies and decisions taken by them also get affected in great manner due to bad credit reporting.
Bad credit reporting also takes place due to some errors contained in the credit report of a person. Errors are quite common and thus, a person should ensure that his credit report is devoid of all types of errors. For this purpose, he can obtain copy of his credit report and can search for errors. New federal laws in United States enables a person in getting one free copy once in a year from each of three credit reporting agencies viz. Trans Union, Equifax and Experian. Some serious errors that can lead to bad credit reporting are wrongfully listing of debts as delinquent, debts belonging of other person with same name, mentioning of closed accounts as open accounts, etc. Whatever is the type of error, it can be removed from the credit report and credit bureaus have to be approached for this for preventing future bad credit reporting.
One important aspect related to bad credit reporting that must be understood here are the rights of a person with respect to credit reporting agencies. These rights have been provided under FCRA or Fair Credit Reporting Act. Under this act, a person can get copy of his credit report whenever he requires by paying the fee. This is besides free copy of credit report that contains negative information and a person has been denied credit due to this information. In case of bad credit reporting, a person has got right to know about the lenders etc that have requested for copy of his credit report in past 6 months. In case of errors that can lead to bad credit reporting, credit reporting agencies are required to respond about the same within 30 days.
A person has also got right to add comments to his credit report, which can reduce the ill effects of bad credit reporting. Negative information contained in the credit report of a person is removed from 7-10 years. If a person wishes, he can restrict the access of his credit report and can even block the credit bureaus from providing information to various credit card companies. It should be noted here that a person can order for a free copy of his credit report once in a year under FACTA or Fair and Accurate Credit Transaction Act, 2003. Apart from ordering online at annualcreditreport.com, a person can also make his request over phone at 877-322-8228.
Other aspect that should be understood regarding bad credit reporting is that credit reporting agencies can remove the favorable information about a person any time, though they generally keep the same for a period of 10 years. It is also believed by FTC that credit reporting agencies shall not remove the favorable information about a person earlier than the unfavorable information. Otherwise also, favorable information about a person is retained in the repository of credit bureau for a period of 10 years.
Other important aspect related to bad credit reporting is the information retention period. Chapter 7, 11 and 12 bankruptcies are mentioned in the credit report of a person for a period up to 10 years while chapter 13 remains mentioned for a period of 7 years from the date of filing, if it has been successfully completed otherwise for a period of 10 years. Collection accounts are mentioned up to 7 years. However, bad credit reporting in this case can be done no later than 180 days calculated from the date of commencing of delinquency. Judgments remain mentioned for a period of 7 years or until the statute of limitation has expired. Similarly, Tax Liens cannot be used for bad credit reporting for more than 7 years after the payment date. Other issues that are used for bad credit reporting include civil suits, criminal records, child support, student loans, etc.
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