What Is a Credit Report?

Credit reports contain information that can help individuals access loans, credit cards, and employment. They provide the information that is necessary to acquire all types of loans, including mortgages, home equity loans, auto, and home equity lines of credit.

Important facts included in an individual’s credit report can influence the interest rate and terms that are offered with specific loans. Additionally, this information can impact the amount of the loan that will be approved. Negative information included on credit reports can eliminate the possibility of obtaining any type of loan at all. Lenders use the credit report of a consumer to gauge his credit worthiness so that they can assess the risk of offering a mortgage or loan.

Credit reports can either assist a consumer in obtaining a new credit card or the information contained on them can prevent that from occurring. A borrower with an excellent credit report score can obtain a generous credit limit whereas a consumer with a poor credit score might not be able to obtain a credit card at all. Moreover, an individual’s credit report can prevent him or her from being offered the job for which they have applied.

What Kind of Information is Listed On Credit Reports?

In general, credit reports include many different details concerning a consumer’s financial history. This includes information about credit card accounts, mortgages, home equity loans, auto loans, school loans, employment history, income level or salary, payment practices, and even illegal activity.

Credit reports include facts about a consumer’s financial history over a long period. In general, much of the information on the report will have been taken from the last seven to ten years. However, particular types of information can date back even further depending on the company that is compiling and maintaining the information. Specifically, a consumer’s employment history might date back for twenty or more years. Most credit reports contain a comprehensive list of financial transactions including the good with the bad.

Characteristically, each of the following types of information are listed on the consumer’s credit report with specific details:

The consumer’s full legal name

Current and past address

Mortgage loans including initial balance, current balance, and term

Automobile loans- both used and new

Home equity loans- both short term and long term

Home equity lines of credit- including current balance and term

Foreclosures

Defaults

Bankruptcies

Tax liens- federal and state

Credit card accounts- major banks

Store specific credit card accounts

Number of credit inquiries made recently

Delinquencies on all billing payments including utilities

Lawsuits and the results

Arrests

Convictions

The details listed with each type of information generally include the date of the initiation of the action. In fact, credit reports include a great deal of detail. The consumer’s current level of debt and income is typically listed. Furthermore, the consumer’s payment history or his habit of paying his bills is listed in the report including whether he or she pays bills on time, pays bills late, pays bills very late, or does not pay bills at all.

The specific type of credit card accounts, loans, and mortgages are included within the report. This includes the name of the lender. Additionally, the length of time that the account has been held by the consumer is also included. Credit reports are designed to help financial lenders and prospective employers assess the risk that is associated with a specific consumer as far as extending credit, loaning money, or offering employment.. Each credit report includes a credit score that can be used to quickly assess the potential risk to the lender.

Credit Scores.

Credit scores range somewhere between 250 and 800 in most cases. However, most consumers fall somewhere in between the scores of 540 and 780. Higher scores indicate that a borrower has a stellar credit history with very few negative items if any. A consumer with a score of 700 or more will not experience any difficulty in obtaining a loan of any type, a mortgage or home equity line of credit or a new credit card account.

Alternatively, consumers whose credit scores fall below a 500 on their credit report will encounter many difficulties when attempting to obtain a mortgage or acquire a new credit card. They might even have trouble when they apply for a new job. Lower credit scores are typically associated with being a high risk.

Consumers who have credit scores between 500 and 600 can usually obtain new credit cards and loans. However, the terms or interest rates offered with these might not be as favorable as the ones offered to borrowers with higher credit scores. In many cases, a consistent effort to pay bills on time and to lower their existing level of debt can raise their scores and allow them to obtain terms that are more favorable.

All credit scores are calculated with a formula using the details listed on the credit report. Quite a few different credit bureaus compile credit reports. Since each of these agencies use their own method for securing information, listing information, and calculating credit scores, the resultant scores vary from one credit bureau to another.

Therefore, when a consumer or a lender obtains a copy of a credit report through one credit bureau, it can be different in the actual numerical value of the credit score and in the details that are listed on the report. Even though the differences are minor in most cases, some lenders choose to obtain several credit reports for each consumer through different credit bureaus.

Credit Bureaus.

The tasks of a credit bureau are to compile and maintain credit reports and calculate credit scores on the majority of consumers. There are three major bureaus that operate nationwide. They are responsible for the vast majority of credit reports and are usually the first choice for lenders who need to obtain someone’s credit report.

Trans Union
Equifax
Experian

All credit bureaus will provide a copy of the credit reports to consumers, banks, lenders, businesses, and financial companies for a fee. Consumers should consider acquiring a copy of their credit report several times a year to verify the accuracy of the information that is compiled.

The information and details maintained in every credit report should be accurate. All consumers have the right to request an investigation by the specific credit bureau if they believe that any of the information is not accurate. If the credit bureau discovers that the information is inaccurate, it will remove the information from the report. If the information is deemed accurate, then it will remain on the report no matter how negative it may be.

The Federal Government passed the FCRA or Fair Credit Reporting Act. This act permits consumers to have free access to their credit reports and allows consumers to obtain a single copy of their credit report from each one of the three major credit bureaus, Trans Union, Equifax, and Experian, once per year.