Credit Reporting System

The Credit Reporting Agencies - TransUnion, Equifax and Experian (formerly TRW) are the three national credit reporting agencies that keep records on consumers. The reporting agencies work with lenders, creditors, insurers and employers to update and distribute your information to the appropriate institutions.

Your credit report is divided into six main sections: consumer information (address, birthday and employment), consumer statement, account histories, public records, inquiries and creditor contacts. When you open a new account, miss a payment or move; these sections are updated with new information.

The old records will stay on your credit report for about 7 years. Not all creditors report to all three agencies and the agencies don't share their data so your reports from TransUnion, Equifax and Experian could be substantially different from each other. That's why it's important to check your three credit reports every few months to ensure that the information is accurate and up-to-date.

Under the Fair Credit Reporting Act, consumers are protected from having inaccurate information on their credit reports. If you find an inaccurate record on your report, try contacting the creditor or lender associated with the mark first. These companies can usually correct the mistake and send an update to the credit reporting agencies. If you can't make progress this way, you can also dispute the inaccuracy directly with the credit reporting agencies.

Credit Reporting Systems Around the Globe Keeping your credit reports healthy will improve your credit scores and help get you the best rates on major purchases. We recommend that you check your credit reports every 3-6 months in order to guard against damaging inaccuracies and identity fraud. Routine check-ups along with paying your bills on time, keeping your credit card balances below 35% of their limits and correcting any negative inaccuracies will help you maintain a healthy credit profile.

Credit reporting is a critical part of the financial system in most developed economies but is often weak or absent in developing countries. It addresses a fundamental problem of credit markets: asymmetric information between borrowers and lenders that can lead to adverse selection and moral hazard.

The heart of a credit report is the record it provides of an individual's or a firm's payment history, which enables lenders to evaluate credit risk more accurately and lower loan processing time and costs. Credit reports also strengthen borrower discipline, since nonpayment with one-institution results in sanctions with others.

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