The 20 Most Commonly Asked Questions About Consumer Credit

1. What is a consumer credit report?
2. What information does a consumer credit report contain?
3. What information is not in a credit report?
4. How can I get a copy of my credit report?
5. What should I do if I find an error in my credit report?
6. Can credit repair clinics fix my bad credit?
7. How does a credit bureau help me?
8. Does the credit bureau approve or deny credit?
9. How are credit granting decisions made?
10. How does divorce affect a person's credit?
11. How does my name get on a mailing list?
12. How can I remove my name from marketing lists?
13. How long does information remain on the credit report?
14. Can incorrect information be deleted from the credit report?
15. What can I do if I've been denied credit?
16. How is a credit risk score determined?
17. How does a collection account appear on the credit report?
18. Why does student loan information appear more than once on the credit report?
19. How do I contact the national consumer reporting agencies?
20. What should I do if I find a fraudulent address on my credit report?

Q1. What is a consumer credit report?
A1. A consumer credit report is a factual record of an individual's credit payment history as reported by their creditors. Its main purpose is to help a lender quickly and objectively decide whether to grant you credit.

If you are one of the more than 15 million people in Australia and New Zealand with a charge account, car loan, student loan or home mortgage, then information about you probably is stored in the database of a consumer credit reporting agency.

Most of the information in your consumer credit report comes directly from the companies with which you do business.

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Q2. What information does a consumer credit report contain?
A2. The typical consumer credit report includes four types of information:

• Identifying Information: Your name, current and previous addresses, telephone number, reported variations of your Social Security number, date of birth, and current and previous employers. This information comes from your credit applications, so its accuracy depends on you filling out the forms clearly, completely and consistently each time you apply for credit.

• Credit Information: Specific information about each account such as the date opened, credit limit or loan amount, balance, monthly payment and payment pattern during the past several years. The report also states whether anyone else besides you (your spouse or co-signer, for example) is responsible for paying the account. This information comes from companies that do business with you. For open accounts, positive credit information remains on your report indefinitely; most negative information remains up to seven years. For closed accounts, information remains seven years.

• Public Record Information: Bankruptcy records; state and district court records of tax liens and monetary judgements; and, in some states, overdue child support. This information comes from public records. Bankruptcy information can remain on your credit report up to 5 years; unpaid tax liens can remain for up to 7 years; other public record information can remain up to seven years.

• Inquiries: The names of those who obtained information about your credit history. Inquiries you initiated (by applying for a new credit card, for example) become part of your credit report and may be considered by those who review your credit history. They remain on your report for two years. Information about those who inquired for the purposes of extending a pre-approved credit offer are included in your information. These inquiries are not revealed to creditors and do not impact your ability to obtain credit. Statements of dispute also may be added by you or your creditors. Creditors report temporary dispute statements when you challenge an account's status with them. The statement is no longer reported when the dispute is resolved, usually within 30 days. If you and your creditor cannot agree on an account's status, you may have a statement of dispute added to your credit history. The statement will remain for seven years.

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Q3. What information is not in a credit report?
A3. Your credit report does not contain data about race, religious preference, medical history, personal lifestyle, political preference, friends, criminal record or any other information unrelated to credit. Nor is there information about your checking or savings accounts.

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Q4. How can I get a copy of my credit report?
A4. To purchase a copy of your credit report call:

Please have the following information on-hand when you call:

• Full name (including generation, such as Jr., Sr., III)
• Current and previous addresses (for a five-year period) with post codes (if you have moved within the past six months, you may be asked to send two proof documents such as copies of a utility bill, credit card billing statement, or driver's license.)
• Spouse's first name and Tax File Number, if married
• Tax File Number
• Date of birth

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Q5. What should I do if I find an error in my credit report?
A5. If you find an error, simply call or write the credit bureau (as instructed on your credit report). The bureau will check with the source of the information and send you an update. If you continue to disagree with the information, you can add a statement of dispute to the credit report. Please be specific with your dispute: "I was never late with my payment" or "That is not my account." Simply saying an item is wrong does not give the credit bureau or the source of the information enough detail to help you resolve your dispute. Because the credit bureau must ask the source of the information for a response, the dispute process can take up to 30 days.

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Q6. Can credit repair clinics fix my bad credit?
A6. Some consumers pay so-called credit clinics hundreds and even thousands of dollars to "fix" their credit report, but only time can repair bad credit. Credit reports generally contain easy-to-follow instructions for disputing information at no charge. Inaccurate information will be changed or deleted. Federal law mandates the time periods that accurate negative information remains on a credit report. The law also requires "credit repair" clinics to explain your rights under the Fair Credit Reporting Act and how those rights enable you to do for free what the clinic is going to do for a fee. They must provide a written contract explaining the services they will provide and cannot request any payment until all the services have been fully rendered. You can withdraw from the contract within three business days. It is illegal for the clinic to ask or suggest that you mislead credit reporting agencies about your creditworthiness or credit standing, or alter your identity to change your credit history.

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Q7. How does a credit bureau help me?
A7. If you're like most consumers in the United States, your ability to own a home, purchase a car, finance a college education, travel and make routine purchases hinges on your responsible use of credit. Because an automated credit reporting system works quietly in the background on your behalf, you have many options in your financial life. For example, if you maintain a good credit history, you can:

• Purchase a home in one area of the country based on the good credit record you established while living in another part of the country;
• Shop for and be offered financial services from institutions in their regions of the country;
• Pay for emergency medical treatment;
• Negotiate a deal for a new car and drive it off the lot within a few hours; and
• Catch an airplane at the last minute.

Credit reporting also helps foster intense competitive marketing battles among financial services providers. This competition provides you with:

• Lower interest rates,
• Reduced annual fees,
• Special toll-free customer service phone numbers,
• Customer recognition programs, and
• Purchase protection plans, among other benefits.

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Q8. Does the credit bureau approve or deny credit?
A8. No. Only credit grantors make lending decisions. A credit bureau's business is credit reporting. It collects information from credit grantors such as banks, savings and loans, credit unions, finance companies and retailers. It stores this information in a computer database, then provides it to credit grantors when you apply for a new credit card or loan. Each credit grantor decides what standards you must meet to be granted credit. The credit bureau does not track the decision a credit grantor makes after ordering a credit report, favorable or not.

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Q9. How are credit granting decisions made?
A9. Potential creditors review credit applications primarily in relation to risk. They try to predict whether you'll repay your debts on time by evaluating your character, capacity, and collateral/capital.

• Character: Your length of residency and employment help credit grantors develop a feeling of your personal stability. They get this information from your credit application. Lenders evaluate your financial character by reviewing your existing credit relationships: credit cards, bank loans, mortgages, etc. This information comes primarily from your credit report.

• Capacity: Your living expenses, open credit limits, current debts and other payments give lenders a sense of how much debt you can realistically pay given your income. Lenders look at your living expenses, current debts and the additional payments that the proposed new obligation would require. This information comes from your credit application and credit report.

• Collateral/capital: Whether the loan is secured by a down payment or asset– and how much that down payment or asset is worth – helps lenders determine the terms of the credit or loan they extend to you.

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Q10. How does divorce affect a person's credit?
A10. When you obtained credit, you and your spouse signed a contract agreeing to pay your bills. A divorce decree doesn't change that contract. When you divorce, each of you remains fully liable for your debts. There are several ways you can prevent credit obligations from making divorce more difficult than it already is – and reestablish your own distinct credit lines after divorce occurs. You may wish to consider the following:

• Communicate with your soon-to-be-ex-spouse. Make as clean a financial cut as possible.

• Communicate with your creditors. Decide which debt belongs to whom, then ask each company and bank that extended you credit to transfer the debt to the name of the person who will be responsible.

• During divorce negotiations, keep your joint bills current, even if you ultimately will have no responsibility for the debt. If you don't, your creditors could become more reluctant to release one party from joint liability.

• Ask the credit grantor to remove your spouse's name as an authorized user or close the joint account to additional charges.

• If your spouse runs up large amounts of debt, you should cancel as many of the accounts as possible. Inform all creditors, in writing, that you are not responsible for these debts. This may not prevent them from trying to collect, but it does show that you attempted to act responsibly.

• Upon your divorce settlement, you and your ex-spouse might consider obtaining individual consolidation loans to cover your share of the joint bills. Pay off the joint bills with your individual loans and close all joint accounts. This helps ensure you'll be responsible only for those bills you agreed to pay. It also will help you establish or reestablish credit in your own name.

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Q11. How does my name get on a mailing list?
A11. There are three primary ways your name might be put onto a mailing list:

• Magazines, clubs and organizations, charities, manufacturers and retailers make lists of their subscribers, customers, members and donors available to other businesses for a rental fee. If you subscribe to a magazine, have a credit card, belong to an organized group, donate money or return a warranty card, your name will likely appear on these lists.

• Companies purchase information from various public and private sources to develop consumer databases for specific marketing purposes. These companies are called list compilers. Nearly everyone's name appears on compiled lists.

• Credit bureaus, under carefully controlled procedures, provide lists of creditworthy consumers to companies that offer credit. This is called a "prescreened" list. Prescreened lists help credit grantors find "ideal" potential customers and send them preselected offers of credit. If you receive a preselected credit offer, all you generally have to do to accept it is sign your name and, in most cases, provide a few other limited pieces of information. You will be given a line of credit or loan if you still meet the predetermined criteria. However, the federal Fair Credit Reporting Act allows creditors to review your credit history when you accept the offer. If you no longer meet the criteria, your application may be denied.

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Q12. How can I remove my name from marketing lists?
A12. The Australian and New Zealand Direct Marketing Associations compiles lists of consumers who prefer not to receive mail or telephone solicitations. The DMA members use the DMA lists to remove names from their own mailing lists. The addresses are:

If you write the DMA, you'll be removed from the DMA member lists for three years. Even though your request becomes effective within five days of your notifying them, it may take up to three months before you see a reduction in the amount of solicitations. Opting out will not end solicitations from all local merchants, religious and charitable associations, professional and alumni associations, politicians and companies with which you conduct business. To eliminate mail from these groups – as well as mail addressed to "occupant" or "resident" – write directly to each source.

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Q13. How long does information remain on the credit report?
A13. Information from credit grantors and public records, including bankruptcies, judgments and liens is stored on your credit report. Missed payments and most public record items remain on the credit report for 5 years, and unpaid tax liens, which remain for 7 years. Positive information may remain on the report indefinitely, although it is generally removed after 7 years. The credit report also lists all inquiries. Inquiries remain on the credit report for 2 years.

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Q14. Can incorrect information be deleted from the credit report?
A14. Information from credit grantors and public records is stored in compliance with the Fair Credit Reporting Act. When you use credit, a record of your payment history is stored in the records of credit reporting bureaus. If you believe the information in the credit report is inaccurate, then you may request an investigation and inaccurate information or information that cannot be verified will be corrected or removed. If you believe that information on your report is inaccurate, the credit bureau will ask the sources of the information to check their records at no cost to you. Incorrect information will be corrected; information that cannot be verified will be deleted. A credit bureau cannot remove accurate information. An investigation may take up to 30 days. When it is complete, you will get notification of the results.

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Q15. What can I do if I've been denied credit?
A15. If you have been denied credit you may call or write to the credit bureau listed on your denial notice. You have the right to contact the credit bureau and obtain the nature and substance of all information in your file. There is no charge for your credit report if it is requested within 60 days of receiving your denial notice.

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Q16. How is a credit risk score determined?
A16. Risk scores are calculated using all of the information on the credit report, and a number is assigned to each item. Each credit grantor determines the value assigned to each item based on factors that it has found to best predict repayment. Not only may a risk score change from day to day based on new information, but also credit grantors may change the scoring criteria from day to day based on supply and demand. If you were denied credit based on a risk score, you may want to contact the credit grantor and ask for the specific reasons.

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Q17. How does a collection account appear on the credit report?
A17. While you make payments on your collection account, the status will remain "collection account." Once you pay the account in full, then it will show "paid collection." A paid collection account will remain on the credit report for 7 years from the initial missed payment that led to the collection.

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Q18. Why does student loan information appear more than once on the credit report?
A18. Student loans are reported individually by enrollment periods; therefore, the loans cannot be combined. Most credit grantors understand this process.

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Q19. How do I contact the national consumer reporting agencies?
A19. Contact one of the following:

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Q20. What should I do if I find a fraudulent address on my credit report?
A20. Contact the U.S. Post Office to report the inaccurate address. In addition, contact the credit-reporting agency on whose report the fraudulent address appears and request that the suspicious address be investigated.

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