Credit Reporting 101

Let's take on the fundamentals of the credit reporting system. From the big three credit bureaus, TransUnion, Equifax and Experian, to your rights under the Fair Credit Reporting Act, this article will help you navigate the credit report maze.

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. Here's an example of how the system works:

1. When you apply for a new credit card the creditor requests a copy of your financial history from the reporting agencies. This causes a "hard inquiry" to be recorded on your credit report.

2. The creditor uses your credit reports and scores along with income and debt information to determine what rates to offer.

3. You start to use the new credit card and the creditor reports your activities to the credit reporting agencies about every 30 days.

4. The credit reporting agencies update your credit report as they receive new information from creditors or lenders.

5. Your credit profile changes based on your financial activity. The next time you apply for a credit card or loan, the process repeats.

Your credit report - 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. Old negative records will stay on your credit report for 7-10 years. Positive records can remain on your credit report longer. Not all creditors report to all three agencies and the agencies obtain their data independently 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 6-12 months to ensure that the information is accurate and up-to-date.

Correcting inaccuracies - 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.

Working the system - Managing your credit and maintaing a good credit history can lead to better rates on major purchases. We recommend that you check your credit reports every 6-12 months or at least 3 months before a major purchase in order to guard against damaging inaccuracies and identity theft. 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.

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Financial tips for couples

Across the country there are thousands of cheerful couples saying "I do" to a lifetime of love and dedication. You have to wonder how many of these brides and grooms are aware that they could also be saying "I do" to hefty mortgage payments and troubled credit reports. Understanding the financial commitments that come with marriage can help to maintain marital bliss long after the ceremony. Here's what you need to know:

1. Talk About It - Openly discussing your finances with your fiancé is the best way to prevent future disagreements. Talk about your spending habits, your savings and your financial goals so that you will both be on the same page. Develop a plan for managing your money after the wedding. Will you open joint accounts? How much do you want to save each month? Work together to create a money management strategy that fits your needs.

2. Wedding Expenses - Planning the wedding of your dreams can sometimes lead to a nightmare of debt. The average wedding now costs $22,000, according to the Condé Nast Bridal Infobank, a hefty sum that can lead to big credit card bills after the honeymoon ends. Talk with your fiancé about how much you can afford to spend without breaking the bank. Be creative about cutting back your budget: using potted flowers and making the invitations yourself can help you shrink your costs without reducing your style.

3. Credit - Understanding your sweetheart's credit history can help you avoid future surprises. Your fiancé's credit could have a dramatic impact on your rates for co-signed loans and joint accounts in the future. If there are past credit problems, work together to clean things up and reduce debts. Starting your new life together could be a lot smoother with good credit.

4. Joint Accounts - Don't worry, your credit reports won't automatically merge together when you get married. Only when you open a joint account, become an authorized user or co-sign on a loan will a record appear on both your credit reports. Combining your finances this way can be a great way to get the best deal on a major purchase. Be careful though, any negative reporting associated with the account could mean double damage.

5. Love Nest - If you are planning on buying a home together, give yourselves at least six months to save up a down payment and reduce your debt-to-income ratio. A few months of financial improvement can help you save thousands on your mortgage.

6. Stay Focused - Above all else, don't let money problems come in the way of your love for each other. Talk honestly about your financial concerns and work together to get through the hard times. Your relationship is far more valuable than anything money can buy.

For more information contact Mark Bustamonte at 954-707-2932 or visit

Financial Education Services (FES) and FES Protection Plan