How to Better Understand Your Credit Report

You may think that your credit report is just another boring piece of information that you'll never have to worry about. However, this report can make all the difference in how well you live your life and your financial freedom. From helping you to open a credit card to receiving the best rates on home and car loans, your credit report is vital to enabling you to function at a high level in the 21st century economy.

Learning what your credit report includes and how various entities use it to evaluate your life prospects from banking terms to employment opportunities is invaluable. You can't afford not to read and learn about the power this report holds.

Contents of a Credit Report

The status of your credit accounts, bill payment history and related information about your creditworthiness are included in a credit report. Specific information in your credit report may also include whether a bill is owed, as well as your debt-to-credit ratio. If you are a renter of property, credit reports also can contain rental repayment information. Traditionally, information on public records such as bankruptcies, judgments and liens may be found on your report.

How Companies Use Your Credit Report

Lenders use your credit report to determine whether you are fulfilling the terms of your account, what interest rates they should you and if they will loan you money. Other companies may employ these reports to determine whether they will provide you with utility services such as telecommunication services, heating and electricity, internet or cable television. Potential employers utilize these reports to determine your trustworthiness for a job, while insurance companies may use them to determine what rates to offer you.

How Credit Reports are Created

Credit reports are compiled by credit reporting agencies or credit bureaus. These bureaus track your payment histories for a particular service or product and other related transactions. Specialty industries collaborate to decide what type of information should be collected.

Who are some of the Credit Bureaus

In the United States, the three credit bureaus comprise of Experian, TransUnion and Equifax. Firms such as Equifax maintain facts about your credit history. You may have received credit from various sources and this information is continuously updated and maintained through these companies. In order to help them determine your creditworthiness related to a home loan, job, credit card or a personal loan as well as to provide you a service or product at a specific rate, lenders, employers, landlords and other service providers buy that information in the form of a credit report from these agencies.

Information Found in Your Credit Report

This report features personal data on your consumer and financial habits supplied as you make payments and submit applications for credit. Data includes your name, addresses, employers, your date of birth and social security number as well as your credit history.

This part of the information mostly consists of details related to your credit accounts that have been opened in your name or accounts that are used jointly with a spouse, for instance. In terms of your financial accounts, present and past creditors provide information regarding whether or not you have paid your bills on time, outstanding balances, the payment terms, the credit limit or the amount of the loan and the date the account was opened.

All of your inactive or closed accounts for the last seven to eleven years also will be mentioned in the credit report. In addition, credit report inquiries over the last two years will appear as well as matters of public record related to child support, liens and bankruptcies over the last seven years. These components of data together help to determine your credit score.

Who may access your credit report

A variety of entities may request access to your credit report depending on the circumstances. For instance, utility companies may access it before providing you with electric service. A bank will review it before issuing you a loan, while a potential employer will access it in making decisions regarding job opportunities with their company. Moreover, if you are applying for an apartment to rent, the leasing company or landlord may review it to determine your suitability for the property.

 

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