Sometimes we talk to consumers who think that Equifax has declined their credit. No matter how many times we hear people say it, the answer is No!
The idea that Equifax and the other credit-reporting agencies can decline your credit is a big MYTH!. The credit-reporting agencies are a part of the credit application process, but a credit-reporting agency cannot grant or deny you credit.
But because so many people call to ask this question, I thought it might help if we talk about the process that occurs every time you apply for credit:
Step 1: You, the consumer, apply for credit with a store, a credit card company, or another lender.
Step 2: The credit grantor—the mortgage lender, credit card company, or other lender you are working with—requests your credit report from a credit-reporting agency. The credit grantor decides which credit-reporting agency to use, so it’s important to make sure that all your credit reports are up-to-date and accurate with each CRA.
Step 3: The credit grantor compares your credit report and other information on your application against its criteria for extending credit, and then it decides, based on all the information, whether or not to grant you credit. Lenders can have different standards and requirements for granting credit, so you might receive a higher credit limit from one creditor than another, or get turned down for one car loan but get a different one from another lender.
Step 4: The credit grantor informs you of its decision to grant or deny you credit.
Take a look at this graphic illustrating the credit process.
Since Equifax and the other credit-reporting agencies don’t grant or deny credit, we don’t even know what it is in your credit report that may be preventing you from obtaining credit. Each creditor has its own criteria for making credit decisions.
Sometimes the decision to deny you credit isn’t even based directly on the credit report. For instance, you may not have been at your current residence or in your present job long enough. If you have questions about why you were not approved for credit, you should contact the credit grantor who declined you and ask for an explanation.
Under the law, if your request for credit is declined, or if you don’t receive the best possible rate, you’re “declined a benefit,” and the creditor must tell you which information contributed to its decision and which credit agency supplied the report. You should receive a letter or some form of correspondence from the creditor in which it explains its decision.
After you’re “declined a benefit,” you have sixty days to look at a free copy of your credit report from the credit-reporting agency that supplied the report to the creditor.
So while the credit-reporting agencies are not responsible for the terms of your credit, the credit-reporting system makes it easier for you to acquire credit while allowing lenders to offer fair terms that match their risk. This helps you obtain credit cards, instant in-store financing, auto financing, and home loans in only minutes, hours, days, or weeks, not months or years.
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