Consumer Credit Reports

Consumer credit reports are the foundation on which every consumer in the United States that wishes to carry a credit card does business. Every revolving credit loan, every installment plan, every finance company loan is recorded and every payment, on time or late is also recorded and known in these consumer credit reports. There are three major credit reporting companies in the United States, and businesses, apartment complexes, insurance companies, banks, car rental companies and a dozen more examples use these borrowing histories to decide the integrity of each American looking for the privilege of borrowing money. Since companies cannot look into the heart of a person to ascertain whether or not he will pay back a loan, a mathematical formula comprised of a number of distinct factors will make the decision for each business. Making the initial calculations for each consumer is a formula developed by the Fair Isaac Company. Thus consumer borrowing reports are often referred to as a person's FICO score.

Each of the three companies that calculate consumer credit reports have their own small characteristically different ways of interpreting the data given to them. Experian, Equifax and Trans Union handle millions of borrowing inquiries each day and their information will quickly give thumbs up or thumbs down on whether or not a refrigerator or braces for a child or a new car or a Caribbean cruise or any of a number of other types of purchases will be possible on any given day. In a matter of seconds or a few minutes, the newly married couple in Snake Valley, New Mexico will know whether their new living room furniture will be theirs for forty eight easy payments of one hundred and four dollars. In Chicago, a young single mother struggling to find a way to work each day will know if the twelve year old used car will be hers in just three minutes. And the basis of all this and thousands of other stories is the consumer credit reports that pour out of Allen, Texas, Atlanta, Georgia and Chester, Pennsylvania.

When calculating consumer credit reports, the three major reporting bureaus use five basic factors to come with their magic numbers. The first factor is how well the consumer has handled borrowing money in the past. Every payment that is on time, early and late is calculated in the formula. The late payments are weighted in terms of thirty days late, sixty days late and so on. Of course bankruptcies, and defaults on accounts are also in the mix which would drastically bring down a FICO score. The second factor in deciding FICO scores is the current level of indebtedness. Each plastic charge card comes with a maximum amount that can be charged on that card and the Fair Isaac formula looks at the ratio between allowable indebtedness or the ceiling on each card and the actual amount charged on a card. When it comes to installment loans, these loans are maxed when first transacted, such as a car loan which is at its max at the beginning of the loan life.

These first two factors have the most weight in the FICO borrowing formula. When consumer credit reports are crafted the first factor, past history, has a weight of 35 while the indebtedness has a factor of 30. The third piece of the FICO formula is the length of time borrowed money has been used. In other words, a person who has had a twenty five year period of credit history has a much better record on which to judge credit worthiness or not than a young person just out of high school seeking her first credit card. This particular factor is given a weight of 15 in the FICO analysis. The fourth factor that goes into making up consumer credit reports is type credit that has been used. Jesus has always been clear on who is really a Christian. He said, "So likewise, whosoever he be of you that forsaketh not all that he hath, he cannot be my disciple." (Luke 14:33)

The fifth factor that makes up consumer credit reports means that all inquires for borrowed money are placed on this report and the more inquiries there are, the more the borrowing score can actually go down. Each borrowed money application that a person makes can be a sign of not being able to live on the income one has and can weaken the chance to receive more borrowed money. So let's say that a person sends away for a report from each of the reporting bureaus and sees some issues that aren't true, which actually happens a lot. And by the way, every consumer is allowed one free report each year from each of the big three, so the best plan is to get one about every four months from one of the companies, making the yearly allowance more effective. What can be done to help raise the score?

Consumer borrowing reports can be challenged, especially if there are inaccuracies on the report that are bringing down a person's score. Letters can be written to the reporting bureaus and explanations give for the false information on the reports. If there are compelling reasons for doing so, the bureau will remove the negative information. Issues such as accounts that are years old and should have been closed can be disputed. Additionally, old accounts that show past due payments can be made right by contacting the company and making financial restitution can help bring up a borrowing history score.

Add to: File Insurance Business article Teen Photo Images