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Credit Reports 101

by: Sahil | last updated: November 13, 2009
Tags: Credit reports 101, credit reports, credit scores, credit, FICO scores, credit bureaus, Equifax, transunion, Experian

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Credit Reports 101

A credit report is a comprehensive and precise account of the financial history (particularly related to credit) of a person. All the main financial transactions including history of borrowing, repayment and bankruptcy is detailed in this report. The report is helpful for lenders when they decide the creditworthiness of a borrower. These reports are acquired by the lenders from companies such as Equifax, TransUnion, and Experian which are called Credit Bureaus.

If you submit an application for a loan or a credit card or a line of credit to make a big acquisition, then the lenders will examine your credit report prior to granting a loan. The history of financial dealings by the applicant plays a very important role in shaping the interest rate on the loan and if you are competent for the loan. If the applicant has a spotless record with first-rate repayment history then the chances of receiving the loan or the credit card or a credit limit increase will perk up radically.

Credit reports are vital for borrowers as well as lenders; for lenders, credit reports give an idea of the applicants creditworthiness. If you have applied for any sort of loan then the lender is certain to check your credit report before releasing any finances. The lender gets hold of these reports from any of the three most important credit reporting agencies; Equifax, TransUnion, or Experian. These agencies document almost each and every one of the financial transactions of the applicant by getting the applicable information from other lenders who have had dealings with the applicant in the past.

Lenders may construe your credit report in quite a different manner than most people assume. A blameless looking section of information to the borrower can be a huge scare for lenders. For example if you have applied for some credit cards just to boost the credit limit or for the benefits that these cards offer then it may be observed in poor light by the lender and may decrease your credit score

The Fair Credit Reporting Act is a federal law in the United States that aims to control the collection, dissemination, and use of consumer information which includes credit information as well. Passed in 1970, the act lays down certain course of action for consumer reporting agencies or credit bureaus including Equifax, Experian, and TransUnion. This act not only assists in keeping a comprehensive record of the consumers credit history but it also guarantees sincerity on the part of credit bureaus.

Any error in the credit report can substantially damage your credit score and bring it downward. This can take place in many ways and care needs to be taken in order to make sure that there are no mistakes in it. Even a single missed payment showing up in error will stay there for seven years if not disputed.

Errors may happen when lenders that have a record of financial dealings with you report incorrect information or unfinished information to the three bureaus. Several lenders do not take the trouble to report to all the three bureaus which results in inconsistency in your credit report and history.

The bottom line is that a credit report can make or break persons finances. They are like glass; once cracked or wrecked, it takes a lot of time and exertion to perk up these reports. Great heed and meticulousness is prudent while dealing in credit related products; particularly in this slump where foreclosures and pink slips have become daily incidents.