About Credit Reports
Whenever you decide to buy something on credit, like a house or a car, or even when you decide to apply for a credit card or a loan, one of the first things that the lender will do is check your credit report. If your credit reports are not good, then you will find it much harder to get a loan for these things. However, the importance of your credit score does not end here. These days, even potential employers are checking the credit of people they interview. It is absolutely vital that you keep abreast of your credit report. In order for you to know what your score is and what it means, then you need to learn all about credit reports and how they work.
What Goes on Your Credit Report?
First of all, you need to know what it is that potential lenders will be looking for when they view your credit report. The best way to think of the report is this. Any time you have borrowed money or had a bill with someone, then this bill is reported on your credit. Your credit report is a complete listing of your history. Your credit report will show the following things:
- Every open credit account you have (credit cards, personal loans, mortgages, car payments)
- How much you owe each of the creditors
- Any late payments you have made in the recent history (up to three years)
- Delinquent or defaulted accounts (up to three years)
- Bankruptcies (up to seven years)
- Number of times your credit has been checked
All of these things will factor in to your credit score. If you have a relatively low amount of open accounts and you have been paying your bills on time, then you will have a high credit score. Anything negative, like late payments, delinquent accounts, too many open accounts, or too high of a debt to income ration, will lower your credit score incrementally. Keep in mind that not just credit cards and loans can show up on your report. In addition, medical bills can be listed of you are late paying them. When you apply for credit with a lender, they will look at all of these things to determine whether or not they will approve you for the loan.
What Will Not Be on the Credit Report?
Of course, some people may be confused as to what will and what will not show up on their report. The above mentioned items will always be on the reports, but there are certain things that will not. The next thing you need to know about credit reports is what will not be on them.
- Your income
- Your bank accounts (savings and checking)
- Criminal record
- Driving history
Your credit report is simply a means of providing lenders something to go by when they are trying to determine whether or not you will be able to pay back a loan.
Credit Reporting Agencies
The next thing that you need to know about credit reports is that there are three different credit reporting agencies. They include Equifax, TransUnion, and Experian. Many people do not realize that there are three agencies. They may have only heard of one of them, like Equifax. However, it is important that you know about all three. Some lenders may report things to one agency and not the others, while many lenders will report to all three.
What does this mean? You may have a certain credit score with one reporting agency and a totally different score with another. Most lending companies, however, will look at all three of your scores before they make a decision on what type of credit they will offer to you. In order for you to know how your credit stands, you must be aware of what your report looks like from all three agencies.
What is the Most Important thing to Know about Credit Reports?
Your credit report can have a very big impact on your life. When you apply for a loan, this will affect whether or not you are even able to get the credit. Even if your credit score is good enough to secure credit, you could end you could end up with a high interest rate that will cost you hundreds to thousands of dollars.
If your credit report is in good standing, then you can secure loans with good interest rates. This can come in handy when you want to apply for things like mortgages. It is important that you do everything that you can to keep your accounts at a minimum and always pay bills on time.