What is Consumer Credit?
Consumer credit is the borrowing of money for goods and services. This could be in the form of credit cards, personal loans, and other lines of credit. Total consumer credit comprises of two major types: revolving and non-revolving. The borrower agrees to pay back the borrowed amount plus interest over a set period of time, usually in monthly installments. Consumer credit is commonly used for big purchases such as cars, homes, and education.
Revolving credit
Revolving credit lets you borrow up to the pre-approved credit limit. The borrower is required to make monthly payments either on the full amount or regular payments. Interest is charged on the outstanding balance. Examples include credit cards, home equity lines of credit (HELOCs), and personal and business lines of credit.
Non-revolving Credit
Non-revolving credit is a type of credit a borrower repays in fixed payments over a set period. Unlike revolving credit, a non-revolving credit is a one time arrangement. Once the credit line is paid off, the lender closes the account. Examples include: home mortgage loans, student loans and business loans.
What is a Credit Report?
A credit report is a record of an individuals credit activity and current credit situation. The report is created by the credit reporting agencies also known as credit bureaus or credit reporting companies, that collect information about an individual’s credit accounts, payment history, and other financial transactions that is submitted to them by creditors, such as lenders, credit card companies, and other financial companies. Creditors are not required to report to every credit reporting company.
What’s in My Credit Report?
Your credit report will include:
Personal information
Your name and any name you may have used in the past in connection with a credit account, including nicknames
Current and former addresses
Birth date
Social Security number
Phone numbers
Credit accounts
Current and historical credit accounts, including the type of account (mortgage, installment, revolving, etc.)
The credit limit or amount
Account balance
Account payment history
The date the account was opened and closed
The name of the creditor
Collection items
Public records
Liens
Foreclosures
Bankruptcies
Civil suits and judgments
A credit report may include information on overdue child support provided by a state or local child support agency or verified by any local, state, or federal government agency.
Inquiries
Companies that have accessed your credit report.
What are Inquiries?
An inquiry is a record of when a lender, a creditor, or other authorized entity requests to see your credit report. There are two types: hard inquiries and soft inquires.
Hard Inquiry: Occurs when a lender or creditor requests to see and individual’s credit report as part of a credit application for a loan or credit card. Hard inquires can impact a credit score and remain on a credit report for up to 2 years. Multiple hard inquiries within a short period of time can signal to lenders that an individual is seeking a lot of credit, which could be interpreted as a sign of financial distress.
Soft Inquiry: Does not impact credit scores and are not visible to lenders. Soft inquiries can be initiated by the individual when checking their own credit report or by organizations like employers or credit monitoring services.
How Do I Check My Credit Score?
As of April 2023, Annual Credit Report is still allowing access to free credit reports once a week. Go to this link: https://www.annualcreditreport.com/index.action to get your reports from Equifax, Experian, and TransUnion.
What if I See Errors?
If you see errors on your credit report, dispute the information with the credit reporting company in writing. Explain what you think is wrong, why, and included documents that support your dispute.