What are credit reports? This is a question that many young people wish to know. Experts in the field of financial and debt management state it is important for one to know the significance of a credit report and why it should never be taken lightly. This post will provide a brief insight into what a credit report is and why one should be concerned about it for good financial health!
An insight into credit reports
Credit reports provide one with detailed information and data on how credit has been used in the past. It provides one information on the amount of debt one has and whether an individual has paid bills within time. One can view his/her credit report at any time without impacting credit score or report.
Know what a credit report includes
A credit report includes the following information-
- Personal data- The personal data of an individual includes misspellings and aliases that have been reported by a creditor or creditors, date of birth, social security number, past and present address, phone number and the names of past and present employers.
- Accounts-A credit report includes the list of credit accounts, including revolving accounts like installment loans, credit cards, auto loans, and mortgages. This list includes the names of creditors, account numbers, payment history, the status of accounts, and balances. It also provides information on whether the account is past due or not.
- Public records- This list covers tax liens, bankruptcies, and judgments passed by courts.
- Latest inquiries- This list includes latest inquiries like those who requested to view an individual’s credit report with a date. One should note that a credit report does not contain data like marital status, bank balance, income, or education levels. A credit report can include the name of a spouse if a creditor reports it. After divorce, if anyone wishes to remove the name of a spouse from a credit report, one should dispute the data.
When one applies for credit like auto loans, student loans, mortgage loans, etc., lenders check credit reports to make decisions whether to approve the credit or not. The credit score in a credit report will also determine the terms and the rates that one qualifies for.
Checking credit reports
There are two ways via which one can check their credit report. One can request viewing their credit report from a credit bureau at any time. In the United States of America, there are 3 major credit bureaus. These 3 credit bureaus contain different information about a person. They are also called credit reporting agencies and are Equifax, Experian, and Trans Union. Creditors cannot furnish any credit information to anyone except to these credit bureaus. Each of these bureaus collects the credit information of an individual from different reporting sources like lenders to place them in a credit report.
Can anyone else view a person’s credit report?
Under the Fair Credit Reporting Act or FCRA, the following organizations and people can view the credit report of an individual-
- The individual- One has the right to view one’s credit report at any time. Viewing one’s credit report will not impact the credit score.
- Lenders- When one applies for credit from an auto lender, a credit card or mortgage company, the potential creditor can review a credit report of that person. These inquiries are known as hard inquiries, and they can affect the credit score. Lenders should have permission to check credit reports for all new credit applications. However, one should note that when a lender views a credit report for making a pre-approved offer, the credit score is not affected at all.
- Employers- Employers can also view credit reports of an individual for making a hiring choice; however, no employer can view a credit report without the written consent of the individual concerned.
- Insurers- When one makes an application to an insurance company, the company will request to look into your credit report. Applications to an insurance company are like a financial account. This gives them the entitlement to ask for a copy of the person’s credit report and his/her credit score. However, before viewing a credit report, the insurance company must obtain written permission from the individual.
- Landlords– When you apply for renting a home or an apartment, you are asking the landlord to trust you will pay the rent every month on time. One is asking the landlord to extend some credit. This gives the landlord the right to ask for a copy of an individual’s credit report as well as score. However, a landlord can only view credit reports subject to the permission of an individual.
- Other businesses- Other businesses might have a valid need to view an individual’s credit report; however, they still need permission like the rest to do so.
How often is a credit report updated?
The credit report of an individual is updated regularly. Lenders provide new information, and old information is removed from the report with time as per rules and regulations by Federal authorities. However, one should note that most lenders regularly report changes in the account of an individual like the payments made and the payments you have fallen behind on every month. If payment is made on one account of an individual, it will not reflect on the credit report of an individual for 30 days.
The goal of credit reports
One should note that credit reports are important tools when it comes to the detection of fraud and identity theft. When one uses personal information for committing fraud like opening a credit account in the name of another person, the credit report is the first place where the first signs of fraud will be noticed. An individual should always monitor credit reports so that these signs of fraud can be caught soon, and action can be taken to arrest the situation.
Therefore, when it comes to credit reports, one should never take them lightly. Be aware and informed all the time!