A credit reference agency, also known as a credit reporting agency serves a variety of functions. These agencies collect credit history data from creditors about individual consumers. The three main credit reporting agencies are TransUnion, Equifax, and Experian. Information on your credit file can remain in place for a number of years and can vary with the type of credit information reported.
Establishing Credit
Your credit file is established as soon as you apply for credit with a creditor and they key in information to retrieve your credit file from a credit reporting agency. You fill out a credit application that includes your name, address, date of birth, Social Security number, place of employment and personal references. As soon as the creditor keys in your personal information a credit file is established and that creditor's inquiry becomes a part of your credit file. An inquiry is a code assigned to each creditor to show that they have inquired about your credit report. When you are approved for credit, your credit history starts when you begin to repay your debt.
FICO Score
Once you have established a credit file or credit report, you receive a FICO score or credit score. Lenders will contact one of the three major credit reporting agencies to receive your credit report before they make a decision to lend you money. They will look at your FICO score, which ranges from 300 to 850, when they are trying to determine your eligibility for credit. The higher your score, the better chance you have of receiving a lower rate of interest on a particular credit product.
Significance
There are five factors which influence your FICO score: your pay history, amount of debt, type of accounts, length of your credit file and new accounts. Approximately 35 percent of your credit score is determined by how you pay your debts and 35 percent is the largest percent allocated to any category.
Trade Lines
When you are approved for credit with an individual creditor, it will report your credit history to the credit reporting agencies. It may report to one, two or even all three agencies but it depends on the creditor. The information is reported in the form of trade lines. A trade line includes all of the information about a particular creditor, including the name of the creditor, balance, credit limit, date last paid and how many times you are late. The trade line will also include the type of account, such as secured or unsecured.
Time Frame
Any type of derogatory information such as bankruptcy, foreclosure, judgments, liens and collection accounts are also reported to a credit reporting agency. This information can remain on your credit file for seven to 10 years. After seven or 10 years has passed, this information should drop from your credit file.
Free Report
If you want a free copy of your credit report, go to http://www.annualcreditreport.com. A free copy is available once a year from all three credit reporting agencies.
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