Credit Checks
Identity theft occurs when criminals use someone else’s personal information such as a social security number, to open fraudulent credit accounts, take out loans, or apply for services or benefits. This is a growing national problem affecting individuals in foster care.
Victims of identity theft may not become aware that their personal information has been compromised until they transition out of care. Youth and young adults may learn for the first time that they were victims of identity theft when they apply for credit on their own. Because identity theft has the potential to damage credit and prevent youth from renting apartments, getting student or car loans, opening a cell phone account, and opening bank or credit accounts, it’s important to identify and resolve credit problems while in care.
Virginia law requires annual credit checks to be conducted for all foster youth ages 14 to 17. When a credit check is run, youth are provided with copies of their credit reports. Caseworkers help youth read and interpret their credit reports and resolve any discovered errors or other issues.
What is a Credit Report?
A credit report is a record of a person’s credit activities. A credit report includes the following:
- Identifying Information: The name (including nicknames and abbreviations), addresses (current and past), social security number, date of birth, and employment information used to identify an individual
- Credit Accounts: The type of accounts (credit card accounts, mortgages or home equity loans, and installment accounts, like car loans), the date the accounts were opened, any credit limits, loan amounts, account balances, and payment history. This includes the contact information for the holder of the account.
- Credit Inquiries: When a person applies for credit or a loan, the lender may ask for a copy of the borrower’s credit report. The credit inquiries section of a credit report will list lenders who have accessed a person’s credit report within the last two years.
- Public Records and Collections: Information including bankruptcies, foreclosures, lawsuits, wage garnishments, liens, and judgments from state and county courts, and overdue debts from collection agencies.
- Positive Accounts and Negative Items: Positive information includes the payment of loans and other debts. Negative items include late payments and debt that was charged-off or sent to a collection agency. Account numbers and addresses for creditors are also listed.
How to Read a Credit Report
Credit Reporting Agencies (CRAs) are private companies that sell the information in credit reports to creditors, insurers, employers and other businesses that use it to evaluate a person’s applications for credit, insurance, employment, or renting a home. There are three major CRAs in the United States: Equifax, Experian, and TransUnion.
Each CRA produces a different credit report, but they all contain similar information. Here are some helpful instructions for reading credit reports:
Other Resources
Everyone in the United States (ages 18+) is entitled to one free annual credit report from each of the CRAs. Visit www.annualcreditreport.com to learn more.
The U.S. Department of Education’s Foster Care Transition Toolkit has tips and resources for money management. Check out the toolkit here (Managing Your Money section, pages 27-31)
