What is a credit report?
Whenever you apply for any type of credit or financing, a credit report is pulled from at least one of the three major credit bureaus. While there are hundreds of smaller credit bureaus around the country, virtually every credit bureau is affiliated with either Experian, Trans Union, or Equifax.
These credit bureaus collect and maintain information on the vast majority of Americans, but they are not affiliated with the government in any way. The credit bureaus are for-profit corporations and they sell your personal information for money.
The credit bureaus receive your personal information through the same lenders who grant you credit. They have agreements with each of these credit grantors that require the credit grantor to inform the credit bureaus of everything that occurs in your relationship with the credit grantor. If you make a payment late, the negative credit listing is quickly reported to at least one, if not all, of the three major credit bureaus and is added to your credit history. Credit reports are not just a record of how you are currently managing your credit accounts. Credit reports are histories of everything you are doing with your credit now, and everything you have done in the past.
The credit bureaus collect this information, list it on your credit report, and then sell it to other credit grantors who wish to see your credit history before they decide to lend you money. The credit grantors who review your credit are especially interested in any negative credit. If you have shown any tendency to pay late, or to disregard your financial commitments in the past, then the creditors’ computers will immediately reject your application.
Just like when you were in high school, your credit report is your financial report card to the world.
What’s in your credit report?
Merchant Trade Lines
These include all regular credit lines such as department store cards, auto loans, mortgages, and credit cards. If there is any history of late payment, or if the trade line was included in bankruptcy, charged off, or put into repossession, the listing will be considered negative by all credit grantors.
Collection Accounts
When an account is referred to collections because of delinquency or because of a bad check, this appears on the credit report as a collection account. Collection accounts can appear as paid or unpaid accounts. Any type of collection account, whether paid or not, is considered very negative by all credit grantors.
Public Records
Public records include bankruptcies, judgments, liens, divorce, satisfied judgments, and satisfied liens. All court records, including satisfactions, are considered negative by all credit grantors.
Inquiries
Every time a potential credit granter looks at your credit file, a credit inquiry appears on at least one of your credit bureau reports. If the numbers of inquiries are few over the last two years, then there may be no negative effect on your credit worthiness. However, if there are many recent inquiries showing on your credit report, credit granters may become nervous and deny you credit.
Many people have never seen their report, but it pays to know what lenders are saying about you, for the contents of your credit report are what the credit bureaus use to calculate your credit score. As you are probably aware, your credit score is what lenders, insurance companies, landlords, and potential and present employers will want to see in order to see how creditworthy you are. If you haven’t seen your credit report lately, you can get a free credit report from each credit bureau – Equifax, Transunion, and Experian – once a year, but you must pay a fee to find out your credit score. Equifax has the FICO score that is most used by lenders.
A credit score of 740 is currently thought to be pretty good, all things considered. A credit score of 800 or more is considered to be almost perfect, and you can easily get a loan or credit card with this score. If your credit score is below 700 though, you are in dire need of some credit repair. Each of the three big credit bureaus will give you a different score, varying perhaps by a few numbers. The reason for this is that not all lenders will report to all three of the credit bureaus. Make sure you are aware of what is contained in your credit report. Not only is it easier to get a loan with a good credit score, but you will also get a much better interest rate.
