What is a credit report?
The credit report is where financial information is stored on every consumer. The most important of this information is concerning how well consumers handle credit that has been extended to them. For example, if consumers apply for and receive a credit card, they are, in effect, receiving a loan from the credit card issuer. The card holder will be required to make payments that must be received by the monthly due date.
If consumers fail to make at least the minimum monthly payments, the credit card issuer will report this fact to the credit bureaus, and the information will be placed on their credit reports for anyone to read who performs a credit check.
The Credit Report and Inquiries
As people check the credit history report of anyone with whom they are planning on doing business, these inquiries will be added to the credit reports. The bureaus will keep these inquiries on the credit report for two years, and both types of inquiries possible, voluntary and involuntary will be listed on the credit history report.
Voluntary inquiries are comprised of the times that people authorize a lender, a future employer or anyone else of their choosing to do a credit check. A person’s credit can also be checked without his or her knowledge, such as by credit card issuers who desire to offer consumers a pre-approved credit card offer.
Identifying Information and What Helps Determines the Credit Score
Credit reports can be used as a way to identify a consumer because they contain information such as name, address, Social Security Number (SSN), birthdate and employer’s information. For the purpose of calculating the credit score, the credit history report will also contain other information, such as:
- Accounts that have been sent to collections agencies
- Bankruptcy filings
- Foreclosures
- Short sales
- Property liens
- Lawsuits
- Wage garnishments
- Monetary judgments
The identifying information on a credit report does not have any bearing on the credit score but the negative information will cause the scores to go down. For example, a bankruptcy will remain on the credit reports for seven to 10 years, depending on the type of bankruptcy that has been reported.
How the Credit Report Records Payment History
Each credit account that consumers open will be listed on the credit reports, and potential creditors can use them to determine if these consumers have a good history of paying their bills or not. When they read the credit report, they will find:
- The type of accounts the consumers have opened in the past, such as mortgages, loans or credit card accounts
- The day the accounts were opened
- How much was borrowed or how high the credit limit was
- The accounts’ current balances
- The consumers’ history of making their payments
The Credit Bureaus
Several credit bureaus gather financial information on every consumer in the country, but there are three major credit reporting agencies that are consulted more often than the others. They are:
- Experian
- TransUnion
- Equifax
Why Obtain One’s Own Credit Report?
The credit history report is so important because it can mean the difference between being offered a new job or receiving a home mortgage. For this reason, consumers need to make sure to check their credit reports on a regular basis to ensure that everything is correct. For this purpose, they are entitled to one free credit report every year from each of the three major credit reporting bureaus.
Because so many people are going to seek the consumers’ credit history report before they do business with people, they will want to always pay their bills on time. Late payments and missed payments are the type of negative information that is reported to the credit bureaus and is added to the credit reports. Bankruptcies and foreclosures are much more serious, and they will also remain on the credit reports for years. Avoiding these financial missteps keep the credit history report in positive territory.