What is a Credit Report

A person’s credit history follows them throughout their life. It tells the story of what they have achieved and where they might have stumbled along the way. To understand what a credit report is and what a credit report is not, it is necessary to understand why a credit history is necessary. A credit report is a way to gain the instant trust of a company or business from whom you would like credit to be extended to you. If you would like a loan from a bank, for instance, your credit report will tell whether or not you are trustworthy based on the number of times others have granted you credit and been paid back fully in a timely manner. In the United States of Amercia when you apply for credit a business will look at your report to determine if they wish to extend you credit, or if they feel you might not be able to pay them back based on your prior or current credit accounts.

A credit report lists your credit card accounts, loans, and other credit activities. It will also list balances you might still have outstanding and how often you make payments. The report also details how regular you are with making payments, and if you are ever late. Actions or penalties for being late will be listed as well as any actions taken against you for unpaid bills.

Another way to understand what is, or is not, a credit report is to understand who puts the information together. When you ask for credit, a business will consult a consumer reporting agency (CRA). A CRA gathers, collects, and sells information about consumers to other companies. They collect and arrange your credit information; then they store this data on huge databases. CRA’s charge a fee for giving this information to businesses or anyone who needs information before extending you credit. There are currently three major credit bureaus in the U.S.

One key aspect of your credit report is your ‘credit ranking’. This ranking shows how your credit stands against the average credit history of other consumers. It is calculated from your charging, borrowing, and repayment history. If you have a good history, then lenders will naturally be happy to work with you. A poor ranking has the opposite effect and will make getting a loan or getting a credit card difficult. For this reason, it is a good idea to get a copy of your credit report and understand your ranking.

A credit report should never be incorrect. This is another reason to obtain a copy of your report and check it over carefully. There are many people who might want to look at your report including creditors, employers, insurers, and even government agencies reviewing your status for benefits. If you find incorrect information; you will need to contact the CRA immediately and provide the correct information. This process can take as long as 45 days. You can then request a new report be sent to you.

Keeping an eye on your credit report and knowing your ranking is a good idea because this information can remain on your credit report for up to seven years.