Credit Reports 101 – What you need to know

Credit reports play a significant role in determining an individual’s chances of acquiring a loan as they offer a deeper insight into the person’s credit rating. Therefore, it is essential to understand what a credit report actually is and what are the factors that might affect your credit ratings.

What a credit report contains
A credit report records all your monetary transactions, which includes paying off any amount of money that you have borrowed in the past. Whether you paid it on time or made a delayed payment will reflect on your credit report accordingly. Any bankruptcy or tax liens will also be visible from your credit report, including the number of time your credit report has been requested by a company or an individual. Whether you are a good credit risk or not will depend on all these criterions. In case you have a bad credit history and have not paid your credits on time, no lender might be interested to lend you money, as they might be apprehensive about getting back their money. The importance of a good credit report, therefore, is not just limited to the difficulty in getting a loan or a credit card. Even landlords and employers tend to check credit reports before lending out an apartment or offering a new job.

It is advisable to get a copy of your credit report annually. In order to get a credit report, all you need to do is contact any one of the credit reporting agencies and make an application. The three major national credit-reporting agencies are Equifax, Experian and TransUnion, working with lenders, borrowers, employers and insurers for updating and distributing the information to the appropriate institutions.

To get a free credit report, you may call these agencies or visit their websites at www.equifax.com, www.experian.com and www.transunion.com.

Consumer credit reporting reform act

The consumer credit reporting reform act entitles you to avail of one free credit report per year from these agencies. All extra copies need to be paid for. However, as per the consumer credit reporting reform act, you may remain eligible for free credit reports under certain circumstances where you are on welfare, you are unemployed, your identity has been stolen or you have been denied credit recently.

Your credit report is primarily divided into six sections referring to consumer information, account histories, creditor contacts, public records, consumer statement and inquiries. Every time you miss a payment, open a new account or apply for new credit card, the new information is updated in all these sections. As per the consumer credit reporting reform act, any previous negative records will remain on your credit report for a period of 7 to 10 years, while positive records may stay for a longer time. It is essential to get a credit report from each of the three credit reporting agencies, as the information updated by them might not always be the same. You might also want to check for discrepancies or errors once you have received your credit report. It is important to inform the concerned parties immediately if you encounter any problems so that they might be rectified at the earliest.