Consumer disclosures and consumer credit reports are both regulated by the Fair Credit Reporting Act (FCRA) and the Fair and Accurate Credit Transactions amendments made to the FCRA. Theyare both obtained from credit bureaus, and there is plenty of informational overlap between the two documents. Despite their similarities, they are used for different purposes and may also be requested by different parties in determining the creditworthiness of a borrower.
When you borrow money in any significant amount, the details of the lending arrangement and your subsequent payment history are usually submitted to the major credit bureaus to be filed under your name. This is how your credit profile is created, how your credit score is calculated, and part of how lenders evaluate your creditworthiness whenever you ask for a loan.
Under the Fair Credit Reporting Act of 1970, you are entitled to know what is in your file, dispute incorrect information, and remove outdated information after a period of seven to 10 years, depending on the type of information.
Key Takeaways
- Consumer disclosures and consumer credit reports are both used to determine the creditworthiness of a potential borrower.
- Both types of reports are regulated by the Fair Credit Reporting Act (FCRA), although they are used for different reasons and requested by different entities.
- Borrowing activity, the details of the arrangement, and the specifics of your repayment history are all reported to the major credit bureaus, resulting in a report under your name.
- The long version of the report, which includes every inquiry on your file, is called a "consumer disclosure; it can only be viewed by you and not current creditors orpotential future lenders.
- The business modified version of your credit report is available for lenders and is called a "credit report." It can be viewed by agencies that can prove they have a reason to see it.
What Are Consumer Disclosures?
The long version of your file is referred to as the consumer disclosure, and only you may request access to it. According to TransUnion, a consumer disclosure lists every inquiry on your file, including promotional inquiries. You can also see any information that has been suppressed, meaning that it does not appear on your standard credit report because one of your creditors has requested that the information not be shared.
Your current creditors cannot request this file, and no potential lenders may request this file when evaluating a credit application. If you receive your consumer disclosure and have questions or think there's an error, you have the right to dispute the information by contacting the credit bureau issuing the disclosure.
What Is a Credit Report?
Another function of the FCRA is the protection of the privacy of the information collected on your personal credit file. This is done, in part, by limiting the access to your credit report to only agencies that can demonstrate a permissible purpose for needing it.
Even when an entity can produce apurpose that is permitted, it does not gain access to your full credit file. Instead, it receives a business-modified version, simply called a credit report. This is what most people think of when they use the term "pulling credit." This version does not include any promotional inquiries or any account review inquiries on your account, and it does not include any information that has been suppressed by other creditors.
The term "credit report" may often be used interchangeably with several different items. Sometimes it is referring to your credit payment history. Other timesit is referring to the consumer disclosure. However, there are additional types ofconsumer reports that are not considered a credit report, such as information kept on your checking account overdrafts.
How Does a Credit Score Work?
A credit score is compiled when a company pulls information from your credit report and uses statistical information to compare it to the credit behavior of people with comparable profiles. The statistical program then assigns you a score reflecting your
creditworthiness, usually between 300 and 850, with 300 the lowest and 850 the highest.
How Is an Investigative Consumer Report Different From a Consumer Credit Report?
An investigative consumer report is akin to a detailed background check in which your character and reputation are assessed. This kind ofreport is not usually used to assess creditworthiness, but rather your viability as a potential employee or tenant. It is different from a credit report. A credit report looks at your borrowing and repayment history to assess your creditworthiness when you apply for a loan or credit card.
What Credit Score Do Lenders Use?
While there are different scoring systems, most lenders use FICO scores. Most people have several FICO scores, and lenders use different ones depending on what type of credit the borrower is seeking, among other concerns. FICO scores are credit scores that were developed by the Fair Isaac Corporation (currently called FICO), that have bee designed to assess a borrower's creditworthiness. They scores are used by more than 90% of lenders.
