When you enter the wonderful world of credit repair, you have to contend with jargon, lots of numbers and other mumbo jumbo. While this can be intimidating at first glance, it’s actually not that complicated. Just the same, it is important to understand the main components of credit reporting and repair. By doing so, you have the best shot at maximizing your credit score in the shortest time possible.
Of all the players in the credit repair galaxy, credit bureaus, creditors and credit collectors are the most important. Let’s drill down and take a closer look at each of these. Once you have a clear vision of how these parties work and interact with each other, it will help you become much more efficient when you decide it’s time to improve your credit score.
Creditors are quite simply people you owe money to. These are vendors who sold you goods or services on credit. If you open a charge account at “Kalmart” and run up a bill for example, they become your creditor. Really simple.
Credit bureaus are huge data gathering institutions that collect every bit of financial information about you that they get from your creditors and others. In the United States there are three major credit bureaus; Equifax, TransUnion and Experian.
Think of these three companies as the NSA on steroids. As I said, “Kalmart” and your other creditors tell the credit bureaus if you’ve been naughty or nice. As a result, the credit bureaus know if you pay your bills on time or not. And just so they (or anyone else) won’t forget, they keep scrupulous records in your file.
In addition to tracking any late payments, the credit bureaus also note any judgments, liens, bankruptcies, charge offs, settlements, repossessions, foreclosures or wage garnishments. So in addition to collecting data from creditors, they also obtain information about you from the government. Scary huh?
Why do they collect all this information? To sell it of course. Your would-be creditors and employers are keen to know as much about you as possible before they lend you money or otherwise do business with you. They figure that if they take a look at your credit history, it gives them a pretty good idea of whether or not you’ll behave well and pay your bills. That in turn helps them decide if they want to do business with you or not and if so, at what interest rate. So your credit history is very valuable and companies pay good money to the credit bureaus in order to have a peak at your information.
Can anyone see your credit history?
The short answer is “no”. But there are still enough organizations out there who can see your data for you to be concerned.
The good news is, you have some protection. The Fair Credit Reporting Act spells out that there must be a legitimate reason to view a person’s credit history. That usually means lenders, insurance companies, landlords, credit card companies, employers and other people or organizations you do business with can have at it. Oh…and of course the government has access to this information too. That goes without saying.
Sometimes you have to sign off before another party can review your credit history but not always. Large organizations sometimes buy subscriptions to the credit bureaus’ data base and have open access without you ever knowing.
Credit or Debt Collectors
If you don’t pay a bill on time creditors report the late payment to a credit bureau. And if you don’t pay up within 90 days, the creditor often turns the debt over to a debt collector and also reports the collection decision to the bureaus.
Debt collectors sometimes buy the debt from the creditor at a discount and then get to keep whatever they collect. Other times, they work on a commission and simply earn a percentage of what they bring in. The important thing to keep in mind here is that debt collectors are in business to squeeze every dime they can out of you.
Are There Limits To What Creditors, Credit Bureaus and Credit Collectors Can Do?
Yes. There are a host of federal laws in place that protect you. The Fair Credit Reporting Act and Fair Credit Billing Act focus on creditors and credit bureaus. They outline what these companies can and can’t do with your information and what they must do if you report an error to them.
Important Reminder: You may uncover an error on the credit report you obtain from the credit bureau, but you may have to hound the original creditor in order to get the mistake corrected.
When it comes to debt collectors, the Fair Debt Collection Practices Act defines who a debt collector is and the lengths to which they are allowed to go in order to collect money from you.
It’s worthwhile to familiarize yourself with these laws.
Credit bureaus, creditors and credit collectors are big well-oiled machines. They’ve got big time lawyers and intricate bureaucracies designed to keep you in a box. But you don’t have to lay there and take it. First understand how each of these companies work and then study the laws that protect you from each of these types of firms.
Are you confused by the credit repair system? What questions do you have?