A credit report is not an asset in the traditional sense, like a house, but you can leverage it like you would an asset. Creditors make most of their decisions using a mathematical formula called the FICO formula. If your credit report contains only positive information, this could make you a great customer to lenders.
Identification
Going by the traditional definition, a credit report is not an asset. Assets hold some intrinsic value and can be liquidated or sold for cash. Some common assets are cars, equipment, stock and cash. Credit reports contain information about your loans and have no direct monetary value to you, the consumer.
Leveraging Good Credit
Most lenders do not make informal judgments about your creditworthiness. The information in your credit report tells the lender how risky you are in the FICO scoring system. When the FICO formula rates you a low risk, you can leverage this into a loan or asset, such as a mortgage. Lenders fight for borrowers who always pay on time, because the chance of not getting repaid in the future is extremely low. When you score gets into the high 700s, you almost always receive the best rate.
Other Benefits
A strong personal credit report might be enough to obtain a small-business loan at a low rate, because handling personal finances usually translates to similar performance in managing a business. You will also have an easier time obtaining an apartment and utilities without paying a large security deposits. Insurance companies may even lower your premium for a positive report -- or raise it for a bad one.
Tip
Start building a credit history immediately if you do not have anything in your report with the major credit bureaus. A limited credit history or a report that has bad information is not an asset to building wealth and may even detract from it. The first step is to acquire a loan from a creditor that reports to Equifax, Experian and TransUnion. Meet your debt obligations every month and eventually your report becomes a valuable asset.
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