What is a Credit Report

You’ve probably heard the term “credit report” before, but unless you’ve applied for a bank loan, you may not know what a credit report is. Credit reports are like a history book. Your entire record for borrowing money is included in this book. From student loans to credit cards, auto loans, or any other type of loan from any financial institution, all of your credit activity is included in your credit report. Every time you make a payment, or a late payment, it is recorded. If you close an account, that is noted as well. Loan amounts and balances, late fees, and judgments against you are part of your credit history and are included in the credit report. This information can stay with you for seven years, so you’ll want to make an effort to make sure your credit report is good.

Why Do You Need a Credit Report?

The bottom line is that you need a credit report every time you borrow money. Sometimes insurance agencies, landlords, and government agencies will look at your credit report. If you apply for a mortgage loan, you’ll most likely go to a bank or other lending institution to borrow money. The organization who is loaning you the money certainly wants to see what kind of payment record you have. This will help them decide if they can trust you enough to loan the money. Someone who pays on time consistently has a better chance of getting a loan at a good interest rate than someone who defaulted or is constantly missing payments.

Who Writes Your Credit Report?

You may wonder who is responsible for putting together this information. After all, there is a lot of personal information about you in a credit report. Whenever you apply for a loan or credit card, the business you apply to contacts a consumer reporting agency (CRA). A CRA collects your credit information from the various lending institutions. They then organize and store this information in their database. There are three major CRAs in the United States.

About Credit Ranking

Your credit score, or credit ranking, is a score based on your borrowing and repayment history. Your history is ranked against that of the average borrower. If you have a good ranking, institutions are happy to loan you their money for a fee (interest rate). Conversely, if you have a poor ranking, it is much harder to get a loan a t a good rate, if at all.

Checking Your Credit

It is a good idea to get a copy of your credit report for your own records. You should look it over carefully. If there is anything that is incorrect or needs to be updated, you should notify the CRA right away. Submit the correct information as soon as possible, since it can take up to 45 days to make the correction. When you’re sure that the corrections have been made to your credit report, request another copy. This way, you can double check to make sure that the information is now correct.

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