Real Estate Articles » Credit

Credit Bureau Basics

By: Wendy Polisi
Submitted: 02:24PM on Tuesday 09 June 2009

In today’s real estate market, it is more difficult than ever to qualify for a mortgage. With delinquencies on the rise, your credit score needs to be good, if not stellar, for lenders to approve your loan.

Still, most people don’t understand even the basics of a credit report or what exactly a credit bureau is. Even seasoned investors are confused on many of the details of how credit works.

This brings us to the most basic credit question of all. What exactly is a credit bureau?

Basically, a credit bureau is a giant record keeper that stores information on almost every adult in the United States. Information includes addresses, employer and most importantly, payment history.

Some people think that when something on their credit report is incorrect, the credit bureau is to blame. Many times, a lender will hear the statement “Experian isn’t reporting my car correctly”.

This isn’t true! Your lender is the one reporting incorrectly.

The credit bureaus collect information, but they do not confirm anything. What they report is simply the data that creditors supply them with. This means that a creditor can report anything to the credit bureau and it will appear on your report, regardless of whether it is accurate.

It is estimated that between 40 and 70% of credit reports contain errors. These errors can lead to increased interest rates, credit denial and even job denial.

Since without your involvement, your credit report is simply a large compilation of unverified data, the federal government has numerous consumer protection laws in place.

The most important of these to understand is that the only time the data in your credit bureau is confirmed is if you file a dispute with each of the three credit bureaus.

When this happens, the creditor has 30 days to prove to the credit bureau that the item is accurate. If they fail to verify the item as accurate within this time frame, the item is required by law to be removed from your credit report.

One of the most important keys to keeping your credit score up is consistent monitoring of your report. There are many great services to help make this easy, but the most important key is consumer knowledge and involvement.