Breaking Down Credit Reports
If you have ever applied for a credit card or other loan, like a mortgage or car loan etc., you’ve probably had your credit report reviewed by the lender. Your credit report has a massive impact on your financial future, so it’s a good idea to know exactly what your credit report is telling the lender about you. Even if you’re not interested in getting credit, your credit report can have an effect on other areas of your life. Potential employers can also view your credit report to assess your trustworthiness as an employee. Landlords frequently check out the credit reports of their tenants before allowing them to rent their property.
In the US, you can request a copy of your report from the three major credit offices: Equifax, Experian, and TransUnion. A recent amendment to the federal Fair Credit Reporting Act requires each of these national consumer reporting companies to provide you with a yearly free copy of your credit report upon your request.
Basically, your credit report is a summary of how you pay your bills; repay loans; how much credit you have available; what your monthly debts are; and information that can help a prospective lender decide if you are a worth the risk in terms of lending their money.
Your credit report is made up of several sections. The first part contains personal information such as your name, current and previous home addresses, social security number, telephone number, date of birth, and your current and previous employers.
Your bill paying history with banks, retail stores, finance companies, mortgage companies, and others who have given you credit is one of the most important parts of your credit report. Public records that might indicate your credit worthiness, such as tax liens, court judgments, and bankruptcies are also included in the section detailing your credit history.
Your credit report includes a full and detailed listing of all credit granters and other individuals who have received a copy of your credit report. Additionally, lists of companies that have received your name and address in order to offer you credit are also included in your credit report.
Most credit bureaus allow both the consumer and the creditor to make statements if there is a dispute about something on the report. If applicable, your credit report will include these dispute statements.
Your credit report does not include bank account balances, race, religion, health, criminal records, driving records, or annual income. You’ve probably heard about a FICO credit score as well. Credit scores are based on formulas that use the information in your report, but they’re not considered part of your credit report.
Any problems with your credit report will result in you being denied credit or receiving a higher interest rate. Red flags on your credit report include excessive applications for additional credit, a short credit history, a high debt ratio, and late payments to previous creditors. In most cases, negative information will stay on your report for seven years. However, bankruptcy information stays on your credit report for ten years.
To keep your credit report in good condition, don’t forget to cancel unused accounts, always pay your bills in a timely manner, never use up all of your available credit, and do not apply for unnecessary credit.
Follow the above guidelines and hopefully you can escape the trap that so many of our countrymen and women are falling into, the dreaded debt trap.
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