How Credit Reports Work

How Credit Reports Work

If you’ve ever applied for a credit card, a loan to buy a house or car, or a line of credit to make some other large purchase, then you’ve probably had your credit report reviewed by the lender.If your report says you don’t pay your bills on time, or that you have a lot of debt, you may not get that loan — or you may get it but have to pay a higher interest rate. Because it can have such an impact on the things you do in your life, you should make sure that your credit report is accurate and that you understand how it affects the credit you can get.

In this article, I will talk about what goes into a credit report, who puts it there, who puts it there, and who can get access to it. We’ll also find out how all of that information is compiled into a single document that can have a pretty big impact on your life.

*Personal identifying information– This includes your name, address (current and previous), Social Security Number, Date of Birth, current and previous employers, and (on the version you get) your spouse’s name may be included as well.

*Credit History– This section includes your bill-paying history with banks, retail stores, finance companies, mortgage companies, and others who have granted you credit. It includes information about each account you have, such as when it was opened, what type of account it is, how much credit it includes (or the amount of the loan), what your monthly payment is, etc. If you’ve closed the account or the loan has been paid off, then that information shows up as well. If there were missed or late payments, this is where that appears.

*Public Records– Information that might indicated your credit worthiness, such as tax liens, court judgments and bankruptcies. This information is readily available from public records.

*Report Inquiries– This section includes all credit granters who have received a copy of your credit report. It also includes any other who were authorized to view it. In addition, lists of companies that have received your name and address in order to offer your credit are included. These companies don’t actually see your report, but get your name if you meet their criteria for an offer of credit, insurance or other product. This is where all of those “pre-approved” credit card offers come from.

*Dispute Statements – The report may also include any statements you’ve made disputing information on the report. Most credit bureaus allow both the consumer and the creditor to make statements to report what happened if there is a dispute about something on the report.

Things that don’t appear on most credit reports include:

*Bank account balances

*Race

*Religion

*Health(although medical bills may show up as debts)

*Criminal or Driving Records

*Income

There are different versions of credit reports available depending upon who is requesting it. The consumer version includes all of the above information, as well as listing of all inquiries for the report. The business version includes all of the above information, but only the inquiries made by companies with a “permissible purpose” — this usually means someone you have initiated business with.

You’ve probably heard about a credit score as well. Don’t confuse your credit score with your credit report. Credit scores are based on formulas that use the information in your report, but they are not a part of your report. Fair, Isaac and Company came up with a propriety scoring formula that most creditors use, although there are other scoring methods that are used for various purposes. This score essentially boils down all of the information in your credit report to a single three-digit number. This gives creditors an easier way of making decisions about your credit worthiness. These numbers range from 300 to 850, with the higher number indicating a better credit risk.

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