Credit Report
There are few among us who have not heard of the phrase “credit report” in our daily life; it is certainly a phrase – as well as a concept – that holds great weight in the financial world and subsequently garners quite a bit of attention from consumers who are looking to obtain significant financing. A credit report is essentially what its name implies; it is a report that details the credit history of each and every consumer. This detailed information includes such things as lines of credit for which the consumer has applied, the loans for which they qualified and received, and their history regarding payments, specifically denoting any history of late payments. Should the consumer have defaulted on any previous loans – or declared bankruptcy for that matter – this information would also be included on a credit report.
Based on their payment history and debt to income ratio, a consumer is issued a credit score – a number along an industry accepted scale that specifies the consumer’s overall creditworthiness. The credit score is – along with the other detailed information – included in a credit report.
Who uses a credit report?
The information included on a consumer’s credit report is compiled by three credit bureaus - Equifax, Experian, and TransUnion. Lenders who are considering loan applications call upon at least one – and sometimes all three – of these credit bureaus to issue a credit report on the consumer in question. Lenders use these credit reports to tell them about the financial history of the consumer and to help them make a systematic decision about the creditworthiness of the consumer and the likelihood that they will be a good credit risk. This is the information to which lenders – credit card companies, mortgage companies, banks, and other financial institutions – turn to when making the decision to open a line of a credit for an applicant.
In some cases, when a job applicant is being considered for a position, an employer may request a credit report to gather pertinent information. This is especially appropriate if the job in question is in the financial arena; the requesting of a credit report is generally commonplace under these circumstances. But there are other employers – in a variety of industries – that find a credit report is incredibly helpful in ascertaining information about the applicant; a credit report can speak volumes about a person in terms of whether or not they are responsible, honest, and reliable. Everyone has financial struggles at some point in their lives; having a blip on your financial record does not necessarily mean that you will not be in the running for a particular job. But a long history of repeated offenses may cause an employer to think twice before making a hiring decision.
Consumers and their credit report.
Potential lenders and employers are not the only ones who can benefit from a credit report. The consumer himself has a lot to gain from knowing the information on their credit report. Fortunately, because this information is personal in nature consumers are entitled to know what is being said about them. The Federal Trade Commission – through their Fair Credit Reporting Act – has ensured that consumers are allowed access to their financial records. To this end, once within every twelve month period consumers are allowed to request a free credit report from all three agencies. While the information comes from all three however, it is not requested from all three individually. Rather, the consumer is asked to visit a central website where they can make one request and receive a credit report from all three agencies within two weeks.
There are very few other circumstances under which a consumer can receive a free credit report. In some cases, depending on the state in which they live, consumers can receive a credit report at no charge within thirty days of being denied credit. Also, consumers may be able to get a credit report for no charge if they are working with a consumer agency regarding debt consolidation or settlement.
In most other cases, however, consumers must pay a fee to receive a copy of their credit report. The fee is small and well worth it when you consider how much impact knowing what a credit report states can have on a consumer’s financial future.
Who benefits from a credit report?
When consumers take control of their financial situation and have all the information that they need at their disposal they are giving themselves a powerful tool. Knowledge is power and when it comes to finances this is especially true.
By getting periodic copies of their credit report consumers can have firsthand knowledge of what circumstances have impacted their overall credit score and what is listed as pertinent information on their credit history. This is significantly powerful information to have when approaching a prospective lender regarding a line of credit. Knowing what is on their credit report can tell a consumer what to expect in terms of what they can anticipate qualifying for and what interest rates may be made available to them based on their overall credit record.
Just as important, a credit report can alert a consumer to information that should not be there. With so much information going into a credit report it stands to reason that there may at one time or another be erroneous information included on the report. It may be that the creditor reported it incorrectly. But whatever the means that the information made it on to the credit report, it is up to the consumer to act as their own advocate in removing information that should not be there; especially as it can have a profound negative impact on the financing that a consumer can hope to obtain in the future.
Additionally, information on a credit report can alert a consumer to the possibility of identity theft; if something is askew they can investigate further to ensure that the information that is included pertains to only their activity. With identity theft consumers can have their information stolen from right under their noses and may not notice anything until their credit score begins to suffer; information that can be obtained by the frequent and responsible monitoring of a credit report.