Credit reporting is when someone is provided with a credit report that details information about their credit activity and any recent credit situations including the details of their credit account and their history of loan repayments. A credit report is basically a compilation of information about how someone handles their debt.
A credit report is full of information about the debt an individual has gathered, where they live, and how they are paying off their bills. It also has information about whether the individual has ever filed for bankruptcy and whether they have had a home or vehicle repossessed.
Many people have more than one credit report. Credit report agencies, also known as consumer-reporting agencies or credit bureaus receive and store your financial information. The information is provided by creditors such as credit card companies, lenders, and other financial organizations. However, a creditor is not required to report all credit information to every credit reporting company.
These reports will then be used by lenders to determine if you qualify for a loan and what interest rates they are able to offer you. A lender will also use the credit report to decide if clients are able to meet the terms of their ongoing credit accounts.
What Information Is Contained In a Credit Report?
A credit report will contain personal information such as:
- Current and previous addresses
- Date of Birth
- Your current name and any other names and nicknames you have used in the past in connection credit accounts
- Phone number
- Social Security Number
They also contain information on your credit account such as:
- Current and historical credit accounts (mortgages, installments, resolving, etc.)
- Account balance
- Creditor name
- Credit limit/amount
- Payment history for the account
- The date the account was opened and/or closed
The Importance of a Credit Report
The reason that a credit report is so important is that different businesses examine the credit report of a client to make financial decisions about them. Banks will look at the credit report of a client before approving them for loans and credit cards such as mortgages and car loans.
For example, a landowner will check the credit report of an applicant before renting to them or not.
Your credit report will impact a number of aspects of your life which is why it is essential that you ensure each detail in it is up-to-date and accurate. A credit report serves as the primary source of information about your credit score. This credit score is a three-digit number that grades your credit report.
A high credit score indicates that individuals will have a positive credit report, while a low credit score is a sign that they will have a negative credit report.