Your Credit Report, What Is It?

If you have ever had a loan, debt collection or credit card, then you probably have one or more than one
credit report. You have likely heard something about your credit report when go through personal
finance news or applying for a new job, but what’s actually a credit report? Or how does a credit report
affect you? In the modern age, it’s really important for all the adults to understand the meaning of a
credit report, and how does it impact on their life. A credit report is one of the most vital documents of
our financial life.

What is a Credit Report?

A credit report is the collection of your debt and credit accounts information and the way you handle
them. In addition, a credit report includes information about how you pay your bills, how much debt
you've accumulated, where you work, where you live, whether you've had a judgment (lawsuit) entered
against you or filed bankruptcy, and whether you've had a vehicle repossessed or home foreclosed. If
you feel that your credit report incorporates a huge amount of information, you need not to worry
about it. A credit report (annual) can be over hundred pages long.

How Does Available Information Get on The Credit Report?

Credit reports are generally maintained by businesses known as credit reporting agencies or credit
bureaus. In the U.S., there are 3 major credit bureaus: TransUnion, Experian, and Equifax. Business that
you work with have agreed to send your information (debt) to credit bureaus (maybe all three or at least
one of them) who then update that necessary information in your personal credit report. However,
most of your loan accounts and credit card information are updated on your report (credit) monthly.

Some companies do not update credit report with the monthly payments but notify the credit bureaus
or agencies when you become negligent on the payments. For instance, your cable bill is not included in
the credit report automatically, but if you ultimately fall more than 6 months behind on the payments,
the bill would be listed on the credit report as a collection (debt).

Credit Reports Generally Contain the Following Necessary Information:

Personal information

 Your full name and any other name you have used in connection with your credit account in the
past, including their nicknames
 Birth date
 Current as well as former addresses
 Phone numbers
 Social Security number
Credit accounts

 Historical and current credit accounts, including the types of accounts (installment, mortgage,
revolving, etc.)
 The credit amount or limit
 Account payment history
 Account balance
 The name/names of the creditor
 The date the account was opened & closed

Collection items

Public records

 Liens
 Bankruptcies
 Foreclosures
 Civil suits & judgments

A credit report can include the necessary information on child support (overdue) provided by a local
child support agency or state or verified by any federal, state, or local government agency.

What Type of Information is Incorporated in Your Credit Reports?

Credit reports incorporate basic and common identifying information like your full name, place of
employment, and address. Previous addresses and misspellings of the name and companies (employers)
can be included on the credit report. This is because of an error with the employer who reported the
information. However, it might be a sign of your identity theft.

Your credit report includes detailed info about your loans and credit cards. For your credit cards, your
credit limit, balance, account status, account type, and history of payment are all listed on the credit
report. Original loan amount, loan balances, and history of payment appear on the credit report.

Public records such as foreclosure, bankruptcy, tax liens, and repossessions are listed in a different
section of the credit report.

Your credit reports include a list of companies that have checked the credit history either as a result of a
promotional screening or an application you submitted. These checks (credit) are generally known as
inquiries. Your credit report will show inquiries from all who have pulled your credit report, including
companies who look at the report for their promotional purposes. A version (lender) of your credit
report shows the detail inquiries that were asked when you put in any type of application.
You Can Check Your Credit Report

You need to order your credit report every year to make sure the detail listed on the report is correct.
However, if you notice you have been a victim of theft (identity), you’ve to monitor the credit report
more regularly. You could order your credit report more often than that if you plan to apply for a major
loan recently or if you're seriously trying to repair your credit.

You may order the credit report in several ways for free via a promotional offer, through a site the
government set up for it, or by purchasing from one of the 3 credit bureaus.

How to Read Your Credit Report

Knowing your credit scores mustn’t be the end of credit evaluation. The reports of your credit from the
3 major credit bureaus (consumer) may help shed light on how negative information can actually affect
your credit, why you’ve been turned down for your credit, and whether someone tried to apply
fraudulently for credit or loan under your name.

A credit report is not different from what the name or activity itself suggests. Your credit report is a
detailed information of the credit history as compiled by one of the 3 major credit rating bureaus -
TransUnion, Experian or Equifax.

These credit rating bureaus issue different credit reports, which can contain information about your
payment history, credit activity, and the status of accounts (credit) based on reporting from different
sources and creditors.

So why are these credit reports crucial for you? Because lenders and credit card issuers pull necessary
information and review them to fix various things like what interest rate they will offer you, whether you
are a credit risk, and the amount of credit limit. Your credit reports can also be reviewed when you are
purchasing insurance or renting an apartment.

Your credit score is a crucial number used to summarize your credit report and creditworthiness. You
will find it at the top of your report, ranging anywhere between 850 at the highest and 300 at the
lowest.

With a huge amount of information, where should you even start the paper when it comes to reading
your credit reports? Let’s Please read on.

What’s in A Detail Credit Report and Why It Actually Matters

Credit reports are generally divided into 6 sections-

1. Personal information

Identity information on the credit reports can include:

 Name
 Birth date
 Social Security number
 Address
 Phone number
If you find some incorrect or wrong identity information on your credit reports, you may file a dispute
about it or the credit bureau get the update from you and change it. You may notify the creditor that
you’ve reported the information to the credit bureau and request for an update.

2. Employer history

Th employer history can be included in the section of your personal information. You can add missing
employer information or file a dispute to change incorrect information, but it’s usually not necessary.
The information of the employer listed on the credit reports is generally there to help cross-check your
identity.

3. Consumer statements

This section of the credit report can contain any statements you have submitted to the credit bureau or
credit agency. For instance, if you’ve disputed some info and the investigation of the dispute didn’t
resolve, your consumer statement could explain how you differ with the information.

4. Account information

This is where you will find exact information on your detail accounts, including:

 Open accounts
 The specific dates accounts were opened and closed
 Closed accounts
 Credit utilization
 Payment history
 Loan payment status
 Current account balance

“If you’re paying bills on time and in full each month, this section will reflect that the account was paid
as agreed,” says John Danaher, president of Consumer Interactive at TransUnion. “However, in the
event a loan goes into collection, this section will reflect the delinquent payment status instead.”

However, any kinds of late payments me be included on your credit reports for up to 7 years from the
missing payment date before they are deleted or removed by the credit agenesis or bureaus.

The Financial Protection (Consumer) Bureau recommends noticing for the following mistakes:

 Accounts belonging with the same name to another person

 Incorrect or wrong payment history
 Accounts created or proposed through actual identity theft
 Reinsertion of data previously corrected
 Wrong credit limit or balance information

5. Public records

Public records can include foreclosures, bankruptcies, civil judgments and tax liens which can damage
your credit report.
6. Inquiries

Hard and long inquiries can hurt your credit scores negatively. However, that is not the single reason to
closely read this section.

These inquiries (hard) usually occur when an institution (financial) checks your credit report if someone
applies for credit or loan in your name. It means that a hard inquiry (unauthorized) on the credit reports
can be a major problem, according to credit expert John Ulzheimer, president of The Ulzheimer Group.
Hard inquiries (unauthorized) that you do not recognize might be a sign of identity theft.

Bottom line

Knowing how to read and learn the credit report can help you understand how you can improve the
credit score. It is also essential to verify your credit reports on a regular basis to keep an eye out for
probable fraud and identity theft.

Credit Score Ranges: How to Compare?

The most used (commonly) scores, VantageScore and FICO, run from 850 to 300. Excellent (720 and up)
or Good (690 and up) scores help you save money and give you better choices. When you read the credit
score, you will likely want to understand what the 3 digits actually mean and how to compare them.

What Is A Good Credit Score?

FICO 8 and VantageScore 3.0, the most used models for credit scoring, have a range of 850 to 300. All
the lenders or creditors set their own standards or rules for what constitutes an “excellent”, “good” or
“bad” score. However, the credit scores generally fall along the given lines:

Credit Score Ranges

 720 and up: Excellent credit

 690-719: Good credit
 630-689: Average credit, also called “fair credit”
 300-629: Bad credit

Fair Isaac Corp. generates the credit algorithm (scoring) used for most of the lending decisions in the US.
Majority of the FICO scores range from 850 to 300, and the greater the credit score is, the better.
However, a few other versions of FICO scores, such as credit card and auto industries, are on separate
scales.

VantageScore is a developed by the 3 major credit bureaus: TransUnion, Experian and Equifax.

For both FICO and VantageScore scores, the information used in measuring credit scores collects from
the credit bureaus, and the useful factor is on-time remission or payments.

How Does the Credit Score Impact Your Life?

Even if your credit score is in the low 450s or 400S, you can still be able to get loan or credit. However, it
will come with specific conditions (depositing money) or with higher interest rates. You may have to put
down deposits on your utilities or pay more for car your insurance.
However, if you be able to add points to your credit score, you will have access to a greater number of
credit products and pay less amount to use them.

For example, a debtor with FICOs around 620 range would pay 65,000 dollars more on 200,000 dollars,
30-year mortgage than a mortgagor with FICO range over 760, according to Informa Research Services.

On the other hand, debtors with scores above 750 have different options, such as the capability to
qualify for 0% interest credit cards and 0% financing on cars.

Find the Right Starting Point

It’s vital to know where your credit score stands, so you can pay more attention to monitor the score.
You can easily get a free credit score report from various finance websites.

The crucial part is to use the same scale for measuring credit score every time someone checks. Doing
something else is like trying to measure the weight on various scales - or probably switching between
kilograms and pounds. Some other sources can be using an entirely different scale.

So, you can pick a score as well as stick with it for your track improvement. Your progress in one-side
score will impact on the others as well.

Creditors Look at More Than Just Credit Scores

When you try to take a loan or borrow money, a good credit score doesn’t guarantee you a lower
interest rate - or even get an approval.

Creditors can gauge whether you’ll repay your borrowed amount of money looking at your credit score
and credit history. If you deep in big debt, but you can still have a good credit scores if you should have a
habit of paying your bill on time.

But your reports (credit) do not confirm whether you afford to repay your credit amount you’re applying
for. That is why your debts and income play a key role in lending decisions, as creditors consider what
you owe as well as assets you’ve accumulated and what you earn. Creditors use a ratio calculation
(debt-to-income) to evaluate whether you can actually repay your debt or loan.

Why Having A Good Credit Score Is Important?

Society is increasingly becoming dependent on enjoying credit to make decisions and purchases. In this
modern age, a good credit score is used for more than just getting a loan or a credit card.

It Affects How Much You Pay and Where You Live

Before you buy a home, lenders (mortgage) want to make sure that you will not default on the
mortgage. If you do not have a good credit score, the creditor will consider the credit risky to give a
mortgage loan. If you are approved for a mortgage loan, your credit impacts your rate of interest which
directly affects your mortgage payment (monthly). Bad credit could be a reason of higher mortgage
payment. In addition, your application (mortgage) could be turned down just because of bad credit.
Never feel that because you are not looking to buy a home right now, so your credit is not important.
Because landlords see the credit as well to decide whether they will rent to you or not. They consider
your lease (or something similar) as a loan. You’ll get a loan to live and they want to know you will pay
back this debt or loan. If you do not have good or fair credit, you can get rejected for an apartment.

It Affects Your Car Payment and What You Drive

Unless you’ve the money to purchase a car, you will have to get a credit or loan. Your credit score not
only impacts whether or not you get approval for a loan, but also the interest rate and amount of the
loan. Loan applicants with good credit usually qualify for bigger loan amounts with relatively lower rates
of interest.

Bad credit ultimately limits your options. Only a few creditors will give you loan if you’ve bad credit and
they will charge a higher rate of interest on the auto loan. A higher rate of interest means a higher car
note to monthly pay.

It Can Also Affect Your Job Search

Many employers and companies conduct checks (credit) as a part of their overall hiring process. They
basically check actual credit reports not their credit scores. If you cannot prove your financial
responsibility, an employer could be reluctant to hire you. For instance, the employer could feel your
level of the loan, or debt is higher for the salary package.

Some employers or companies also check your credit scores before giving a raise or promotion
especially for executive or financial-related positions.

Credit Score Impact Your Ability to Start A Business

Many of us have dreams of starting an own business. Majority of the businesses or startups need a big
amount of money that you couldn’t have available. You will need to get a small business loan in that
case. Among all the other things, you should have good credit score to qualify for a business loan.

References:

- https://www.thebalance.com/

- https://www.transunion.com/

- https://www.myfico.com/

- https://www.bankrate.com/

- https://www.nerdwallet.com/

- https://www.investopedia.com/

- https://www.creditkarma.com/