How Does a Credit Report Work?

Chances are good that you've had your credit report checked by a lender or creditor. What your credit report says about your borrowing and repayment habits greatly impacts the loan and interest rates you qualify for. It is very important to understand what a credit report is, who puts the information there and who has access to it. A credit report can best be described as a summary of your credit history. It lists any credit account or loans you have, balances, payment history and any actions brought against you because of defaulted payments.

Information Contained in a Credit Report

Your credit report contains 4 types of information: Personal, credit-related, recent inquiries and public record information.

Personal Information: Your name, past and current address, telephone number, birth date, Social Security number and employers.

Credit-related Information: This contains your payment history on all accounts (mortgages, retail stores, credit cards, other loans and lines of credit). It also contains information on credit limits, monthly payments, missed payments or defaults, and whether the account has been paid off or closed.

Public Records: This section usually contains bankruptcies and court judgments you might have against you.

Recent Inquiries: This includes a list of dates and names of people who have accessed your credit report. Some people who access your credit report are current and prospective creditors and employers.

Finally

The only people allowed to access your credit reports are prospective and current employers and creditors, insurance companies, government agencies and yourself. One thing to remember about your credit report is that it does not tell a lender whether to grant you a loan; it merely provides relevant data and leaves the decision-making to the lenders.

Check your credit report often to make sure that the information is accurate. You are entitled to one free credit report a year from all three credit reporting agencies (Equifax, TransUnion and Experian). Report any errors immediately.