Many people actively monitor their expenses and current financial situation before making any major purchases or investment decisions. Keeping tabs on your credit report is one of the ways you should do this.
There are organizations that exist to facilitate acquiring of your financial information, which is utilized by individuals and various lending institutions. Lenders and credit card companies require information about the financial situations of people who apply to them for borrowing funds or obtaining a line of credit. These credit reporting agencies maintain a detailed database record of the financial status of individuals, which is known as a credit report.
Credit Report
Credit reports are written records of an individual’s transactions of credit cards, loans, payments and outstanding debts. It contains current as well as past payment information along with outstanding balances, information about judgments and bankruptcies, child support payments and a list of organizations and companies who have requested a copy of the credit report. Details such as ethnicity, medical history, religion and criminal record information are absent from these reports. The focus of information contained in credit reports is solely to reflect the creditworthiness of an individual.
Information In The Credit Report
Information included in a credit report includes personal identity information such as full name and any aliases, past and present addresses, date of birth, social security number and the spouse’s information, if applicable.
Finance related information in the report includes the details of any bank accounts, credit card issuers, retailers, lenders and utility companies. Similarly, county and state court records on tax liens, bankruptcy and monetary judgments are also included in the report.
All credit information about individuals, whether positive or negative, continue to be reflected on the credit report for about 7 years. Bankruptcy information if any, is retained for a period of 10 years.
Types Of Credit Reports
Good credit is typically the result of an individual having made all credit card and loan payments on time and spending well within the stipulated credit limits. Bad credit on the other hand, occurs when an individual has been unable to make payments on time, resulting in adverse entries in the report about late payments, or payments made that are less than the required minimums.
Credit Reporting Agencies
Credit reporting agencies collect general financial information about an individual’s financial status such as past financial transactions, bank loans, lines of credit and credit report requests by potential lenders.
There are three main credit reporting agencies – Equifax, Experian and TransUnion. These agencies have branches all over the United States and track the financial records of nearly 200 million consumers. Most of the information that goes into the preparation of credit reports is collected from credit unions, banks and other financial institutions.
Tip: By their very nature, credit reporting agencies work for lenders, financial institutions and associated companies. Do not make the mistake of thinking that they work for you. Sure, they are targeting the consumer (you) and they may even reference the fact that they serve you (again, the consumer) in their slick advertising. It can be very compelling and misleading – don’t believe it.
Getting A Credit Report
You are entitled to receive one free credit report every twelve months from each of the three credit reporting agencies. A collective report, also called a merged report which includes information gathered from all three credit reporting agencies is also available. As a consumer, you should be aware that not all 3 credit reporting agencies will have the same information in their files. It isn’t uncommon for each credit reporting agency to have substantially different information. That’s why obtaining a merged report is so important.
You should always obtain a copy of your credit report on a regular basis to determine if your credit situation is favorable before conducting any major transactions or making any major purchases, such as applying for a loan to buy a home. This is because many banks and lending institutions offer the highest interest rates to those with low credit scores.
If you find any negative, erroneous information in your credit reports, you should immediately contact them in writing disputing the entry. Credit reporting agencies are bound by law to correct or remove any entries that are not correct.
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