Accuracy of Employment Credit Checks

Employers that use credit reports tend to pull them from three major, private credit reporting agencies, but most of these reports contain at least one error, according to a 2004 U.S. Public Interest Research Group study. The high rate of errors means it is critical for job seekers to review their credit reports and correct mistakes before looking for a job.

Identification

The only difference between an employment credit check and consumer credit check is that an employment credit check does not include an applicant's name and credit score, and the bureaus do not list the inquiry on the person's credit history. Equifax, Experian and TransUnion provide the majority of employment and consumer credit checks, according to the Privacy Rights Clearinghouse. The commonly cited U.S. PIRG study claims that 80 percent of credit reports contain at least one error.

Considerations

As of the date of publication, the Federal Trade Commission is in the process of completing a study of the accuracy of credit reports, which the agency should complete by December 2012. In the meantime, a few states, such as Illinois, bar employers from eliminating candidates from consideration from a job based solely on the applicant's credit history. Also, the FTC issued an interim report in December 2010 that declared the issue of credit report accuracy as so questionable that employers should exercise extreme caution when taking into account a job applicant's credit history.

Benefits

Inaccuracies in a credit report can benefit a potential applicant. For example, a 2009 study by the Consumer Federation of America and the National Credit Reporting Association found that 20 percent of consumers with a score in the range of 575 of 630 benefited from reporting errors, such as the bureaus omitting a collection account or civil judgment. On the other hand, 20 percent of people in that same score range had errors that damaged their credit history.

Tip

The federal government requires the national credit reporting bureaus to give consumers one free report each year under the Fair Credit Reporting Act via Annual Credit Report. Consumers can dispute anything, even incorrect demographic data like job history and telephone number. If a consumer wants to dispute an item on his report, he should identify the problem, such as by printing off a report and highlighting the error, and including evidence to support his claim, such as a copy of a canceled check. Sending a certified letter guarantees the bureaus receive a dispute claim and that the consumer has record of each bureau accepting the letter.

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Information You Need to Report Unpaid Bills to Credit Bureaus

Businesses that wish to report unpaid bills to the credit bureaus, must be members. The credit bureau may have you fill out an application. You also need the proper equipment that allows you to transmit the data. There are alternative ways that allow you to report to the bureaus.

Membership fees

To report information to the credit bureaus, you must fill out a data furnisher agreement and pay the necessary fees. There are monthly fees as well.

Meet data requirements

Any information you submit, transmit or send must be in the Metro 2 format. This is the format accepted by all of the credit reporting agencies, according to datalinxll.com.

Other requirements

You also need an office set up in a designated space. Sometimes representatives of the credit bureaus visit businesses to make sure they are legitimate before approving them.

Another alternative

Many small businesses such as doctor offices are not members of the credit reporting agencies (credit bureaus) because of the expensive fees. They turn over their delinquent receivables to collection agencies, many of whom are members of the credit bureaus. The collection agency reports the information to the credit bureaus.

Legal actions

If you begin legal action against a debtor and you win a judgment, this becomes public record, which is recorded and indexed at the court house. A public record of this sort can appear on the debtor's credit file.

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Factors Affecting Credit Scores

If you have a good credit score, that means it's easier for you to get credit cards and loans and to qualify for favorable terms. If you have a bad credit score, it can prevent you from getting any loans, making big-ticket purchases or being able to get a Visa or MasterCard. You need to know the factors that affect a credit score if you want to know why yours is high or low and if you want to improve it.

Payment History

According to Fair Isaac Corp. (FICO), the biggest factor that affects a credit score is a consumer's payment history. This history accounts for a full 35 percent of the score. If a consumer pays his bills on time, this will have a positive effect on the score. If he is late on his payments, his score will go down. A consistent history of late payments has a much greater effect than only one or two incidents. The length of time also has an effect. Payments that are delayed by 60 to 90 days or longer have a more serious influence than those that are late by 30 days or less.

Amount Owed

The amount of money owed by a consumer is the second most important factor influencing her credit score. In addition to the balances, FICO says the types of accounts also play a role. The number of installment loans such as a mortgage or auto loan is weighed against the number of revolving accounts, such as credit cards or store accounts. This accounts for 30 percent of the credit score.

Other Factors

Three other factors make up the remaining 35 percent of a consumer's credit score. FICO says the length of a consumer's credit history is worth 15 percent of the score. A longer history has a better effect than a brief one because it gives a more accurate picture of the consumer's long term fiscal performance. The types of credit used and the number of new accounts make up 20 percent of the credit score.

Range

The five factors that affect a credit score are calculated to come up with a three-digit number, which can run up to 850, with the best scores running between 720 and 850. According to FICO, consumers with this score typically have no problem getting credit and qualify for the lowest interest rates. Those who score between 700 and 719 may pay more interest, but they can still readily open new accounts. Scores between 675 and 699 carry a higher interest penalty, while those whose scores fall below 675 may have trouble getting credit and will pay extremely high interest rates if they do.

Distribution

According to FICO, the majority of Americans have a credit score between 750 and 799. Another 18 percent of the population scores between 700 and 749. Only 13 percent have a score of 800 or over, and only 7 percent score 549 or below. Consumers who have a low credit score can boost it by improving their payment history because that factor wields the heaviest influence.

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What Does a Docketed Judgment Do to a Credit Rating?

Prospective lenders and creditors use your credit rating as a risk assessment tool when deciding whether to do business with you and how much interest to charge you on financial transactions. If a previous lender sued you and holds a civil judgment against you as a result, your credit rating suffers and future lenders may determine you too risky to work with.

Docketed Judgments

As soon as the judge hands down a decision in favor of the creditor, a court judgment exists against you. The judgment does not, however, appear on your credit report immediately. The creditor must file the judgment with the court clerk before the court's decision becomes docketed and added to the county public record.

If the creditor has yet to docket your judgment, paying the debt you owe in full could prevent the legal decision from ever appearing on your credit report. Each county has its own set of rules that govern this process. Once a judgment is docketed, however, the credit bureaus will pull it from the public records database and add it to your credit files.

Credit Damage

Judgments are always derogatory, but the degree to which a docketed judgment hurts your credit depends upon your current credit report. There is no hard and fast rule dictating how many points you will lose after a judgment appears on your report. This depends entirely on your current credit score. In general, the better your credit is prior to the judgment, the more points you stand to lose afterward.

Time Frame

A docketed judgment remains a derogatory entry for the full period of time it appears within your credit history. Unlike most credit entries, however, the length of time a judgment appears on your credit file before being removed varies by state. According to the Fair Credit Reporting Act, if your state's enforcement period -- the amount of time a creditor has to enforce a judgment in your state -- exceeds seven years, the judgment remains on your credit report for the duration of the enforcement period. If the enforcement period is less than seven years, the judgment remains for seven years before being deleted.

Considerations

A judgment has the greatest negative impact when it's initially inserted into your credit file. As time passes, the judgment influences your scores less and less before finally aging off your credit report entirely. This is because recent items influence your credit rating to a greater degree than older entries. Once the credit bureaus delete the judgment from your credit files it will no longer impact your credit scores at all.

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Credit Improvements

Credit scores reflect your financial health. They tell a lender how well you manage your financial obligations and credit. It is easier for a borrower with high credit scores to obtain a loan than one with low scores. Improving your credit scores can translate to lower loan fees and better rates when purchasing insurance. Property managers use credit scores when evaluating a renter's application, as do some employers, when considering an applicant for employment or promotion.

Review Credit Reports

The three major credit-reporting agencies are TransUnion, Experian and Equifax, and each may report a different credit score for the same individual. Before you make credit improvements, you must understand what is on your credit reports, as well as your credit scores. You are entitled to receive one free credit report each year from each of the three major credit-reporting companies. To obtain free credit reports, visit AnnualCreditReport.com.

Removing Information

After receiving a copy of your credit reports, read each one carefully. Look for inaccurate negative information. Your report might also have negative, yet accurate information, which you can have removed. Certain negative items, such as foreclosure or bankruptcy, stay on a report for a set number of years. Sometimes credit reporting agencies fail to remove the negative items after the time frame. Each credit-reporting agency has its own procedure for removing information from your credit report. Removing negative information whenever possible raises your credit scores.

Resolving

Some negative information on the reports needs to be resolved before having it removed from your credit reports. This involves contacting the party that reported the item, such as an unpaid medical bill or other unresolved issue.

Managing Credit

Paying a creditor one day late can adversely affect one's credit scores. Another consideration is your ratio of debt. The greater span between your open credit and what you've actually borrowed improves credit scores. For example, if your credit card limit is $5,000 and you have only charged $1,000, you will look better from another person with the same credit limit who has charged $4,900.

Opening Credit

When establishing credit, it is necessary to have creditors, such as a credit card or car loan. While you need to have creditors, it is a bit of a balancing act, as having too many can be a problem, as can having none. Paying off credit cards improves your credit, yet canceling the card after paying it off can lower your credit score because it lowers your total available credit.

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How to Get Credit Marks Off of Your Credit Report

You probably realize that it's important to maintain a good credit history. When you buy a car or home or apply for a credit card, your credit report is the key element that determines how much money you qualify for and what your interest rate will be. In some cases, utility providers and employers may also check your credit history before offering you service or a position. As a result, you should establish and maintain a good credit report. Sometimes, however, you still end up with a few blemishes on your report. Don't lose hope, though--learn how to have those marks removed form your credit history.

Instructions

1

Obtain a recent copy of your credit report from all three credit reporting agencies. Since each agency is different, your reports may contain conflicting information, so it's important to check all three.

2

Review each report carefully. Take note of any issue that you feel is incorrect.

3

Contact each of the credit reporting agencies in writing. Identify all of the issues you are disputing and request that they be removed or corrected. If you are requesting a correction, make sure to provide the correct information.

4

Provide your name and address as well as the reason for your disputes. Include a copy of the credit report from the specific credit reporting agency you're contacting, with the items in question referenced.

5

Send your letters by certified mail so that you can verify they were received. You should also keep copies of the letters for future reference. If you have a secure connection, you can also file a dispute online at each of the credit card bureau websites; however, experts recommend filing a formal dispute by certified mail.

6

Contact the appropriate creditors by mail to let them know you are disputing the information. If you have any documentation that supports your dispute, you should also include those items in your letter.

7

Wait for the issue to be resolved. Usually this takes about 30 days. If the credit reporting agency agrees with your dispute, the issue will be removed and you should receive a new copy of your credit report showing the updated information.

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What Happens When You Walk Away From a Student Loan?

Students often borrow money to pay for college. Some students have difficulty paying back those loans, which could be substantial depending the amount owed. The U.S. Department of Education, the loan guarantor on non-private loans, offers deferment, forbearance, income-sensitive payments and cancellation options to help students avoid default.

Bad Credit

Your student loan creditor, the financial institution that loaned you the money, reports information about your defaulted student loan to the credit bureaus: TransUnion, Equifax and Experian. Such information can result in a low credit score. Having bad credit and a low credit score could prevent you from being approved for credit cards, mortgages and auto loans. You could also have difficulty renting an apartment if you apply for housing in a development that pulls credit reports as part of the application process.

Wage, Benefit and Tax Garnishment

The government can garnishee your wages without a judgment by as much as 15 percent if you walk away from your student loans. The DOE can also garnishee your Social Security benefits when you retire by the same amount. Any tax refund your receive could be confiscated during the time your student loan is in default. The DOE, however, does allow you to dispute a wage garnishment order or to start repaying your student loans before the garnishment order goes into effect.

Background Checks

Some federal and private-sector jobs perform background checks on potential employees before making job offers. You could lose job opportunities if you have bad credit as a result of not paying your student loans. Some companies may even allow you to start working on a preliminary basis while they conduct a background check and then terminate you if your credit report shows adverse information.

Lawsuit

The DOE can sue you and place a lien on your property if you refuse to pay your student loans. You could end up being forced to repay your student loans, plus legal fees, if a judge rules against you.

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