The credit report is a file that credit reporting agencies maintain about financial consumers in the United States. This report is tracked under a person's name and Social Security number. Creditors use a credit report to make decisions about a consumer. That's why it's important to monitor your credit report and ensure that information reported by creditors is correct.
Collecting Information
A consumer reporting agency (CRA) is a company that gathers information about consumers and sells that information to creditors. A CRA makes money by charging a fee for releasing a copy of a consumer credit report to the business or individual requesting the information.
Credit Decisions
A creditor uses a consumer credit report to decide if it's worth the financial risk to lend money to that consumer. For instance, a car dealer requests a credit report from a CRA to assist a potential car buyer. The dealer serves as the go-between, negotiating with banks and other lenders on the consumer's behalf. If the credit report is poor, including problems like late payments and delinquent accounts, it will be hard to find a lender to issue a loan and the consumer might not be able to buy a vehicle.
Types of Information
A credit report tells creditors, employers, landlords and other authorized persons information about your credit history. Be aware of what kind of information a credit report contains so you know what kinds of decisions these parties might make about you. A CRA shows how a consumer has performed regarding past accounts, including borrowing, charging and repayment activities.
Credit Accounts and Public Records
A credit report provides a glimpse of a person's financial history with specifics. For credit accounts a person has held, including mortgages, auto loans, student loans, store credit and credit cards, a credit report shows the loan type, the date the account was opened, loan total or credit limit, cosigners and pattern of payments. Public records include information such as tax liens, bankruptcies and judgments filed against a consumer. If you have problems in these areas, it will be harder to get credit.
Credit Scoring
A creditor might not request a full credit report, but instead it might request a credit score from one of the three reporting agencies--Transunion, Experian or Equifax. Your credit score is based on five criteria -- payment history, outstanding debt, length of credit history, recent credit inquiries and types of credit in use, according to Realtor.com. A credit score might be all that a creditor, such as an auto lender, needs to know to decide whether you qualify for a loan.
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