Now we’ve grown into a country that seek for direct gratification, the syndrome of buy now but pay later. Hence it would be difficult for you to get the goods that you want at a time you really want it, that is to those who have poor credit ratings. Having a good credit rating is guaranteed to get what you want in the future, and the key to a life free from worry and make your life more comfortable, therefore consumer credit has become accepted widely as a replacement for cash.
When you apply for any kind of credit, including the main agencies of credit reporting that hold the file of your credit report, you should understand all aspect about what is involved and the work of credit to benefit yourself as a consumer. You will be able to make the best choice for yourself and not take anything but what that you deserve, plus be able to determine your financial wellbeing after you understand what is in your credit report and what the creditors and banks are seeking for.
Lenders may want to know anything about you when you apply for credit, the information about your credit history, your assets, your employment history, and your assets will be crucial for them. By means of an application of credit, a lender will get tons of information from you, then to verify this information and review your scores of credit report and credit references, they will pull your reports from the credit bureau. Next the lender will determine the risk of your credit and make a final decree concerning the approval or refusal for your credit as well the interest rate that will be applied to you based on the evaluation of the application of your credit plus your credit report.
Now you have understood more about how to obtain credit, now let us explore more about the factors that can be a liability or an asset when you apply for a credit – your credit report.
The definition of a credit report
A credit report is a resume of your financial condition, a summary of your reliability in finance, that contain all information about your personal stuffs as well credit. The report of your credit is kept by the credit reporting agencies, also called as credit bureaus, and distribudted to landlords, insurance companies, employers, lenders and other companies who can use this information legitimately according to the FCRA (Fair Credit Reporting Act). Out of several creditors, your personal and credit information is transferred to the credit reporting agencies using electronic method that will automatically update your profile.
Things that exist in the credit report
Your credit report consists of five different areas : your credit score, public record information, identifying/personal profile information, credit history, and inquiries.
Your personal information or information pertaining you will be recorded for your details – such as your previous and current employment, date of birth, number of social security, previous and current addresses, your name or any alias and perhaps the name of your spouses. There can be some mistakes in the recorded information such as your name that spelled incorrectly, this can happen when creditors take the bureau of your credit as they often do when they enter the information using the computer where errors often occur in the date entry, and all of the mistakes will update your report from the credit bureau. Anyway, if there is a detail that is far from close, like an address, this should tell you to check further because it can be a sign that you become an identity theft victim.
INQUIRIES – in this part you will see some of the parties that have asked a copy of your credit report as well the date when it was done in the previous two years. The inquiries have two types, the first is soft and the other one is hard. A hard inquire is at the time you have applied for one thing and is started by you, for instance, you have completed an application of credit for a credit card, or applied for insurance, or perhaps applied for a mortgage or a loan. When the creditors check your credit report, these hard inquiries are the inquiries that can be found on your credit report. When you ask for a credit report by yourself, then it called a soft inquiry but do not show to the creditors. A soft inquiry can derive from your current creditors that keep tracking your account, companies that attempt to provide promotional application for credit to you and at any time you ask for a copy from your report of credit.
HISTORY OF CREDIT – In this part you will see past closed accounts as well current accounts that still active, mortgages, loans, and your credit cards with an itemized list. The information reported covering how your account was paid, date of last activity, and the way that account is paid plus all late payments, date of last payment, monthly payments, limit or high balance, when the account was open, and type of the account.
PUBLIC RECORDS – This information dericed from courthouses in local, state, and federal level and covers over due payments on child support, court-ordered payments, tax liens, bankruptcy records, monetary judgements, and foreclosures. Public records will decease the score of your credit because they are negative reference of credit. They stay on your credit report too from 6 to 10 years.
CREDIT SCORE – The scores of your credit repots are a score that determine the risk of your credit and the tendencies of defaulting on a loan. In making decision about the approval to lend you money, lenders will use this scores as a tool. The score of your credit is a review of your credit at certain time, and can change everyday. The score has three digit of number that range from 300 and 850. Based on statistics, you will tend to default on a loan when the number is higher, hence your credit is not so risky, and if the number is lower then there is a tendency that you will default on your payments, and cause your credit to be much riskier.
It is still possible for you to borrow money if your score of credit is low, but you will tend to pay a bigger interest rate and you might not be able to get the money that you ask for and perhaps must pay more fees, in essence you are not given a mercy at all by the lender. But the bigger your credit score the more you be in charge, and with no restriction, you can get all kind of loan with the best rates.
When the credit bureaus consider a lot of factors such as the limit of your credit balance, the previous and current thing that lower your score, late payments, and your history on payments because your score of credit is a calculation which is very complicated. Your score will become smaller if you are over or at your maximum limit of credit. In addition to that, your score will be made smaller by all derogatory public records or information, such as written off accounts, judgements, collection, and bankruptcies, plus the length of time you have had credit.
The source of information on the report of my credit
Any informations concerning the history of your credit is collected by companies called credit reporting agencies or credit bureaus. In the US, there are three main credit bureaus, Trans Union, Experian, and Equifax. They get information for free from creditors and the credit bureaus updates and keeps the file of your credit with this information. On a regular basis, mortgages, credit cards, loans, and report from creditors are using electronical ways. When you apply for credit, your file is updated too, and when they pull your credit report, the information is transferred to the credit bureaus.
The main credit bureaus
In the US, there are three main credit bureaus : the Trans Union, Experian, and Equifax. The three credit bureaus are companies that work independently, and you must know that they don’t share information. Then it is possible for you to obtain different credit report from each of them, and that the information contained can be different. Throughout the United States, there are lots of smaller companies that work as credit bureaus but the three companies are the biggest and the major credit bureaus used by financial institutions and banks. You will know that creditors use one of the three credit bureaus, but they often use only one and not all the three.
Who can access my credit report
The FCRA (Fair Credit Reporting Act) is a rule determining the parties who have access to your credit report. In common, a credit bureau may only give information out of your credit file when the requested file has something to do with potential dealings in finance that involve you, the issuance of particular licenses, insurance, an application for employment, collection of a debt, a tenancy applications, and the extension of credit. As a part of relationship of an ongoing business, the law provides access to your report to these companies. An example is when you have a loan in certain bank and you forgot making your payment, then the bank has a right to get the latest copy of your credit reports. This option is pretty much used by credit card providers.
They assume this as the maintenance of your credit. Because credit cards continue to roll, the state of the customer could change, therefore the credit card companies will get the latest copy of the customer’s credit report to identify and search for indications if a customer has exceeded the credit limit which resulted in the loss of their ability to repay the loan arrears. That is the way credit card companies raise or lower your interest rates or credit limits automatically. But this rule does not apply to business owners, and they must get permission from employees every time they request a copy of your credit report.
You also have the right to obtain a copy of your credit report, and with the internet, you can get it very quickly and in many different ways. You can buy a copy of your credit report from all the three credit bureaus : Trans Union, Experian, Equifax, the cost might be different, under the rules of the FTC (Federal Trade Commission), they are limited to the number they can take from you. Because some states assign the credit bureaus to provide a copy of your credit report in periodic period at no cost, then you should check your state laws. If you have gotten rejection for credit or other advantages based on the report of your credit, then FCRA provides you the chance to obtain a copy of your credit reports, you have the right to obtain a credit report for free from the credit bureau that given the report. The FCRA also permitts you to get credit reports for free. If you obtain some assistance on welfare, if you lose your job, or if you become a victim of identity fraud or theft.
