Credit Reporting: How Does It Work?
In order to determine a consumer's credit worthiness, creditors and lending institutions have come to depend on credit reporting agencies. Credit reporting agencies supply individual reports that provide consumer specific information for lending purposes. With the advent of technology, most creditors now have automated systems that provide them direct access to credit reporting agencies. In most cases, credit agencies or credit bureaus provide personal, legal, and account history related information. In recent years it has become more common for lending institutions to use multiple credit reports to meet lending requirements. Besides meeting lending requirements, multiple reports also provide additional security measures. Using multiple sources for reporting purposes provides a more comprehensive and complete background check on a consumer's credit and spending history.
Traditionally, when a consumer submits a credit application, creditors forward that information to the credit reporting agencies. This is how credit reporting agencies are able to accumulate personal information on people. This information often includes items such as the consumer's name, address, social security number, employment information, marital status, telephone number, and possibly income. By utilizing credit reports, lending institutions are able to cross-reference the information that a consumer provides on a credit application with the information that the credit reporting agencies have on file. Some credit reporting agencies even hire companies and or contractors to research and verify that the information entered on a consumer's credit application is accurate and verifiable.
Most credit accounts, on a monthly basis, are reported to credit reporting agencies; these reports will reflect a payment and account history for all credit related accounts. The information that a credit reporting agency provides is known to as a tradeline. On a credit report, there is traditionally a tradeline for every creditor that reports account information to the bureaus.
As I mentioned earlier, not all lending institutions report to the credit bureaus; however, most do. The major credit bureaus provide reports which include a consumer's payment history in 30-day intervals. This is due to the fact that most consumer billing cycles follow a similar payment pattern. Most lending institutions have a proprietary set of rules and guidelines that govern the thresholds at which they report consumers as being delinquent in their payments. It has been my experience that some lenders have gone as far as not report delinquency until the consumer's account reaches 60 days past due. Other lenders are much stricter in their guidelines and will report delinquency at 30 days past due. Traditionally, a credit report will provide a detailed summary of any delinquency you have had with your creditors. This is measured by the number of times that you fallen more than 30, 60, 90, and 120 days past due. Many of these credit reports use a rating system that assigns a specific status code to each 30-day period of missed payments.
In the consumer lending industry, this method is often referred to as the simple method. For example, an R-1 rating represents a consumer account that is current or an account that was paid properly and that is in good standing; an R-2 rating indicates that payments were paid 30 days or more after the due date but less than 60 days after the original due date; an R-3 rating represents that the bill was paid 60 or more days after the original due date but is less than 90 days past due; an R-4 rating shows that a consumer has fallen 90 or more days past due but is less than 120 days delinquent; an R-5 rating indicates that a consumer has fallen 120 or more days past their original due date; an R-7 rating shows that a creditor was forced to repossess collateral on the account and an R-8 rating means that the account was referred to collections in an attempt to recoup payment. The rating of R-9 is traditionally used to show that a debt or debts have been discharged through bankruptcy, have been repossessed or foreclosed upon, or are currently in collections.
Alan Barnes IAPDA Certified Debt Arbitrator and President and CEO of Debt Regret, Inc. http://www.debtregret.com
MORE RESOURCES:
 RTE.ie | Citigroup Posts $2.5 Billion Loss on Write-Downs New York Times, United States - By LOUISE STORY Hobbled by the credit crisis at home, Citigroup has limped through nine months in the red, reporting a $2.5 billion quarterly loss on Friday ... Credit Costs Weigh on Citigroup Citigroup credit default swaps narrow 15 bps-Phoenix Credit Costs Weigh on Citigroup |
 BBC News | Ackermann says credit crisis end in sight Financial Times, UK - Josef Ackermann, Deutsche Bank’s chief executive, on Thursday said the credit crunch was at “the beginning of the end” as banks and regulators have taken ... 2nd UPDATE: JPMorgan 2Q Net Down 53% On Credit Woes, Markdowns JP Morgan: The Legacy of the Credit Crunch Why No Outrage? |
Studying up on credit scores Chicago Tribune, United States - In matters of money, a credit score assesses your financial responsibility. And just as with taking your first practice test, your score may be low when you ... Given a Shovel, Digging Deeper Into Debt |
Dollar Rebounds From Record Versus Euro as Credit Turmoil Eases Bloomberg - The US currency also rose versus the yen on signs US investment banks will withstand credit-market losses and the Federal Reserve and the Treasury proposed ... |
 BBC News | Credit crisis: Merrill Lynch to sell Bloomberg stake and keep HQ after Tehran Times, Iran - The loss was due to write-downs of $9.4bn on the value of mortgage holdings, credit-related derivatives and instruments guaranteed by crisis-hit monoline ... Merrill Drops After $4.65 Billion Second-Quarter Loss (Update2) Quarterly loss at Citi smaller than expected, but Merrill disappoints BlackRock shares soar on earnings, Merrill stake move |
$10m W/Bank Credit: Boom time for small-scale mining The Punch, Nigeria - This was the scenario, which the World Bank set out to help Nigeria change in 2005 when it granted the country $120m credit under the Sustainable Management ... |
If high credit-card debt is dragging you down, it's time to start ... Boston Globe, United States - High credit-card debt is one of the biggest issues facing consumers, says Dara Duguay, director of Citigroup Inc.'s Office of Financial Education. ... |
Mortgage sales pressure fuelling credit crisis: ACTU ABC Online, Australia - The Australian Council of Trade Unions (ACTU) has accused banks of fuelling the credit crisis by forcing staff to push mortgages onto people who cannot ... Banks 'pushing' families into debt Banks lean on staff to push loans |
No deals for debits at the pump Detroit Free Press, United States - I would have paid the same price if I used a credit card. Bring the Benjamins and you'd get that super-low price -- OK, low by today's standards -- of ... Gas stations turning to using 'gift |
Teton County development plagued by credit crunch Fox 12 Boise, ID - Developer Bill Reid said a nationwide credit crunch prevented him from winning more financing for the 1350-acre Huntsman Springs project. ... |
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