- This article discusses the general concept of term credit history. For detailed information on the same topic in the United States, see Credit Score in the United States.
A credit history is the debt repayment record that is responsible to the borrower. The credit report is the borrower's credit history record from a number of sources, including banks, credit card companies, collection agencies, and governments. The borrower credit score is the result of a mathematical algorithm applied to credit reports and other information sources to predict future delinquency.
In many countries, when a customer fills in applications for credit from a bank, credit card company or store, the information is forwarded to the credit bureau. Credit bureaus match names, addresses and other identification information to credit applicants with information stored by bureaus in their files. Records collected are then used by lenders to determine individual creditworthiness; namely, determine the ability and track record of someone in paying the debt. The willingness to pay off debt is shown by how past payments made in the past to other lenders. Lenders are happy to see consumer debt obligations paid regularly and on time, and therefore focus primarily on missed payments and may not, for example, consider overpayment as compensation for missed payments.
Video Credit history
Use of credit history
There is much discussion about the accuracy of data in consumer reports. In general, industry actors argue that the data in the credit report is very accurate. Credit bureaus point to their own studies of 52 million credit reports to highlight that the data in the report is very accurate. The Consumer Data Industries Association testified before the US Congress that less than two percent of the reports that resulted in consumer disputes have wiped the data because it was a mistake. Nevertheless, there is widespread concern that the information in credit reports is prone to errors. So Congress has enacted a series of laws aimed at resolving both error and perception of error.
If US consumers question some information in the credit report, the credit bureau has 30 days to verify the data. More than 70 percent of these consumer disputes were resolved within 14 days and then consumers were informed of the resolution. The Federal Trade Commission states that one large credit bureau noted 95 percent of those who disputed an item seemed satisfied with the outcome.
Another factor in determining whether a lender will provide consumer credit or a loan depends on income. The higher the income, all other things being equal, the more credit the consumer can access. However, the lender makes a crediting decision based on the ability to pay back the debt (income) and the willingness (credit report) as indicated by the history of regular payments, without payment.
These factors help lenders determine whether to extend credit, and what are the conditions. With the implementation of risk-based pricing on almost all loans in the financial services industry, this report becomes more important as it is usually the only element used to select the annual percentage rate (APR), grace period and other contractual obligations of credit or loan cards.
Maps Credit history
Calculating credit score
Consumers can usually check their credit history by requesting credit reports from credit agencies and demanding correction of information if necessary.
In the United States, the Fair Credit Reporting Act regulates businesses that make credit reports. These businesses range from three major credit reporting agencies, Experian, Equifax, TransUnion, to specialized credit reporting agencies serving specific clients including payday loans, utility companies, casinos, landlords, medical providers and employers. One requirement of the Fair Credit Reporting Act is that its regulated consumer credit reporting agency provides a free copy of a credit report for each consumer requesting it, once per year.
The Government of Canada offers a free publication called Understanding Your Credit Report and Credit Score . This publication provides examples of credit reports and credit score documents with notation explanations and codes used. It also contains general information on how to build or improve the credit history, and how to check for signs that identity theft has occurred. This publication is available online through http://www.fcac.gc.ca, the Canadian Financial Consumer Affairs website. Paper copies can also be ordered at no cost to Canadians.
In some countries, in addition to private credit bureaus, credit records are also managed by the central bank. In particular, in Spain, the Central Credit List is kept by the Spanish Bank. In this country, individuals can get their credit report for free by requesting them online or by post.
Immigrant credit history
Credit history usually resides in one country. Even within the same credit card network or within the same multinational credit bureaus, information is not shared among different countries. For example, Equifax Canada does not share credit information with Equifax in the United States. If someone has lived in Canada for years and then moved to the US, when they apply for credit in the US, they may be disapproved due to a lack of US credit history, even if they have excellent credit ratings in their country. homeland.
An immigrant may end up building a credit history from scratch in a new country. Therefore, it is usually difficult for immigrants to get credit cards and mortgages until after they work in a new country with steady income for several years.
Some lenders take credit histories from other countries, but these practices are not common. Among credit card companies, American Express can transfer credit cards from one country to another and in this way help start the credit history.
Adverse credit
Bad credit history , also called sub-prime credit history , non-status credit history , broken credit history , bad credit history , and bad credit history , are negative credit ratings.
Negative credit ratings are often considered undesirable by lenders and other credit extensions for the purpose of lending money or capital.
In the US, consumer credit histories are compiled into credit reports by credit bureaus or consumer reporting agencies. The data reported to these agents is primarily given to them by creditors and includes detailed records of a person's relationship with the creditor. Detailed account information, including payment history, credit limit, high and low balance, and any aggressive actions taken to recover matured debts, all reported regularly (usually every month). This information is reviewed by the lender to determine whether to approve the loan and what the terms are.
As credit becomes more popular, it becomes increasingly difficult for lenders to evaluate and approve credit card and loan applications in a timely and efficient manner. To solve this problem, credit scoring was adopted. The benefit of scoring is that the credits provided are available to more consumers and at a lower cost.
A credit score is the process of using proprietary mathematical algorithms to create a numerical value that describes the applicant's overall credit worthiness. Scores, often based on numbers (ranging from 300-850 for consumers in the United States), statistically analyze credit history, compared to other debtors, and measure the magnitude of financial risk. Because lending money to a person or a company is a risk, credit judgments offer a standard way for lenders to assess the risk quickly and "without prejudice." All credit bureaus also offer credit ratings as additional services.
The credit score assesses the likelihood that the borrower will repay the loan or other credit obligations. The higher the score, the better credit history and the higher the probability that the loan will be repaid on time. When creditors report excessive late payments, or difficulty in collecting payments, the score will suffer. Similarly, when adverse assessments and collection agency activity are reported, scores decrease even more. Recurring misbehavior or public record entries may decrease the score and trigger what is called a negative credit rating or adverse credit history.
The value of consumer credit is a calculated number of factors such as the amount of outstanding credit versus how much debt they have, their ability in the past to pay all their bills on time, how long they have credit, the type of credit used and the number of questions. The three major consumer reporting agencies, Equifax, Experian, and TransUnion all sell credit scores to lenders. Fair Isaac is one of the main developers of credit scores used by these consumer reporting agencies. The complete way in which a consumer FICO score is calculated is very complicated. One factor in consumer FICO scores is credit checks on their credit history. When a lender asks for a credit score, it can lead to a small drop in the credit score. That's because, as stated above, a number of questions over a relatively short period of time can indicate consumers are in a difficult financial situation.
Consequences
Information in credit reports is sold by credit agencies to organizations that are considering whether to offer credit to individuals or companies. It is also available to other entities with "permitted purposes", as defined by the Fair Credit Reporting Act. The consequence of a negative credit rating is usually a reduction in the likelihood that the lender will approve the loan application on favorable terms, if at all. Loan interest rates are heavily influenced by credit history; The higher the credit rating, the lower the interest, while the lower the credit rating, the higher the interest. The increased interest is used to offset the higher failure rate in the low-rank individual group of individuals.
In the United States, insurance, housing, and employment may be rejected on the basis of a negative credit rating. A new study shows that employer credit checks on job seekers prevent them from entering the work circle. Estimated figures show that one out of four unemployed Americans have been asked to check credit when applying for a job. The size of this phenomenon has become a major concern of the US government. Federal regulations require employers to receive permission from job candidates prior to running a credit check, but it is not possible to enforce employer disclosure for reasons of work rejection.
Note that it is not the credit reporting agency that decides whether the credit history is "detrimental." It is the individual creditor or creditor who makes the decision; each lender has their own policy of what scores are included in their guidelines. The specific score included in the lender's guidelines most often is not disclosed to the applicant for reasons of competition. In the United States, the creditor is required to provide an excuse to refuse credit to the applicant immediately and must also provide the name and address of the credit reporting agency that provides the data used to make the decision.
Abuse
Intelligent consumers and criminal-minded people have been able to identify and exploit vulnerabilities in credit scoring systems to get credit. For example, previous ownership of a credit card can significantly increase an individual's ability to earn further credit, while privacy issues can prevent exposure scams. Certain telecommunications companies and their relationship with credit reporting agencies have enabled the creation of credit files to be created by the exploitation of privacy blocks, which reject third party entities for the actual information held by the government. While the credit reporting system is designed to protect lenders and borrowers, there are loopholes that can allow opportunistic individuals to abuse the system. Some of the motivations and techniques for credit misuse include stirring, quick credit applications, recurring credit checks, selective credit freezes, apps for small businesses rather than personal credit, piggyback and hacking, as happened with Equifax in April and September 2017.
Following this security breach, the Global Credit Profile (GCP) blockchain project was announced on September 13, 2017 by Pave Inc.
In addition, fraud can be done on the consumer by the credit reporting agency itself. In 2013, Equifax and TransUnion were fined $ 23.3 million by the Consumer Financial Protection Bureau (US) for cheating customers about their service fees. The service advertised as $ 1 is actually billed for $ 200 per year.
See also
- Alternate data
- Comparison of free credit report websites
- Credit bureau
- Credit card
- Credit score
- Credit score in the United States
- Credit zombies
- Identity theft
- Fair Credit Reporting Act
- Accurate and Accurate Credit Transactions Act
- Fair Debt Collection Practice Act
- Office of Fair Trading
- Remortgage
- Experienced trading path
References
Further reading
- Lauer, Josh (2017). Creditworthy: History of Consumer Supervision and Financial Identity in America . New York: Columbia University Press. ISBN: 9780231168083. OCLCÃ, 980857936. Eligible credit: Consumer Survey History and Financial Identity in America on Google Book.
Source of the article : Wikipedia
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