Kidz 4 Money, A MindSet of Wealth

In every school or job, there is always someone who keeps up with everybody’s business. We call them a busybody or nosey. If you want to know about someone, you can usually ask that busybody and they will have the goods on that person. This is the same concept as a credit report. The credit agencies are the go-to people for documented information about everyone’s financial life.

A credit report is similar to your school report card or school transcript. Your school report card is an individual performance report of the school year, quarter, or semester of every student. Often, they will include an overall score or class ranking; this is how a FICO score (discussed in next chapter) works for a credit report. This information on your transcript or report card is available for teachers, school administrators, colleges, employers, and of course parents.

Your credit report does the same thing; the difference is that it provides a financial report of how you spend your money.

What is a Credit Report?

A Credit Report is a document compiled of:

Ø Identifying information – Birth date, birthplace, job history, salary, all current and previous addresses, mother’s maiden name, etc.

Ø Financial habits – This is good or bad payment habits of credit activity for credit cards, car loans, house payments, personal loans, etc.

Your credit information is collected and compiled into a Credit Report by three (3) major companies:

Ø Equifax

Ø Experian

Ø TransUnion

They are called “Credit Agencies” or “Credit Bureaus”. There are actually dozens of credit agencies, but the ones listed above are the major three. Each credit agency provides credit reports to determine your level of financial performance as consumers, just as the school system issues report cards to determine your level of academic performance. Your credit report determines your level of credit performance and is your financial fingerprint. You cannot escape it but you can control it. Your credit report will always be with you, before you and behind you. It represents your reputation in the personal financial community.

Sidebar:

All credit reporting agencies are private and for-profit businesses. They are not government agencies. The Fair Credit Reporting Act (FCRA), the Federal Trade Commission (FTC), and your State Attorney General police these agencies and their practices to prevent any misconduct or corruption of your vital and private information.

They clearly state how credit-reporting agencies must conduct their business and what your rights are as a consumer. They are behind the 2004 Act, which gives consumers the right to view their credit reports. Before 2004, these agencies were not forced the credit agencies to show you what they were putting on your report, no one person ever knew what their complete report stated.

How would this be a problem for you if you could not see your report?

The credit agencies sell your personal information to lenders, creditors, employers, insurers, property owners, and other businesses.

1. What are the three major credit reporting agencies?

Ø ____________________________________________

Sidebar:

You are entitled to order and receive one FREE credit report each year (some states two per year) from all three of the major credit bureaus. You can also order a Free credit report if you have been denied credit, which gives you an opportunity to see what derogatory information was used by the creditor to deny you credit. It’s the law!

Here is an example of how credit reporting works.

Let's use Baker’s shoe store. Baker’s offers credit cards to its customers. You complete a credit card application and you are approved. You purchase 2 pairs of shoes, which total $128.

Baker’s subscribes to one or all three of the major credit bureaus: Equifax, TransUnion, and Experian. Baker’s pays a fee to the credit bureaus to report the monthly payment history of every customer that has a credit card.

Now the credit bureaus have a file on you and receive information from Baker’s on how well you pay, how much you charge on your credit card each month (your new balance), and how long you’ve had the account open. Each credit bureau does this for every creditor (storeowner, creditor, bank, etc.) that subscribes to them. This information on your credit report is available to anyone who wishes to investigate you as a potential buyer or borrower.

Who gets to see your credit report? __________________________________________________

What Type of Information is Listed on Your Credit Report?

The credit reporting agencies gather information such as:

Ø your name and any variations of your name

Ø your social security number

Ø your date of birth (age)

Ø your current and previous addresses

Ø your current and previous employments

Ø your marital status

Ø legal and judgment actions filed against you

Ø loans, including balances, payment history, date opened and last activity

Ø accounts that have been paid properly

Ø accounts that have not been paid properly

Ø inquiries

This information comes from any credit application you have completed, any information you have listed with your employer, information on your driver’s license, and much more.

Your credit worthiness (credit score) depends on the information that shows on your credit report.

Credit: A Double-Edged Sword

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