A credit report, en-suite list of historical records of past borrowings, acts as a report card in demonstrating your attitude in managing finances. Within the enclosed report, you may identify paid and unpaid debts, secured and unsecured loans, lending histories and modes of payments.

 

Your personal credit report reveals urgent information that you’ve not honored, thereby turning over to debt collections agency. Mishkins [2013] provided statistics on bad debt recovery services being invited once debtor’s filed for bankruptcy or faced repossessions. Financial institutions like banks often conduct background searches on credit reports in decision-making process; approving credit, verification of identities, and relevant purposes as defined by Federal law.

 

How is a credit profile built?

Domicile in the U.S, your local report is available at three major bureaus namely; Experian, Equifax and TransUnion [Credit-Repair Guide, 2013]. Each company has its own version of maintaining a report card while the main framework does not differ much. It is on the methods of calculation that shapes the outcome in determining whether the profile is suited for granting credit, nothing more.

 

If you’re interested in learning more about your debt profile, paying a short visit to the nearest agency can enable you to familiarize with necessary obligations. Fortunately, an individual is entitled up to 3 reports each year and subjected to additional charges upon requesting beyond three cards.

 

How your credit report is useful & why?

The basis of your credit scores derived mainly from your credit report, an imperative measurement and indicator to bulge bracket institutions. Information being listed on credit reports is one of the best gauges being used to determine fico credit scores [Experian, 2009].

 

If your credit report depicts a timely paying and long history of borrowings, it certainly fetches high quality credit scores in the eyes of lenders, thereby (likely) enabling you to secure favorable terms upon applying for credit cards and loans. One catch is to be able to prove your credit trustworthiness.

 

On the flip side, Cheong Shum et al. [2009] warned on poor financial habits leading up to lower credit scores and evidently shown on your credit reports. Statistics from borrowing records do not lie. Lenders often disapproved bad histories and borrowers find it harder to seek redress. TransUnion credit bureau depicted consumers facing tough approval in attaining credit cards and loans too.

 

 

What’s the content of credit report?

Easily dividing into four quadrants, your Experian credit report is as follows:

  • Personal Identity: (1) Individual’s name (2) Address or Location (3) Employers
  • Credit Accounts: (4) Credit cards (5) Fixed-income mortgages (6) Auto or Car loans (7) Others
  • Creditors’ Inquiries: (8) Names of companies (9) Dates of credit retrievals – up to 25 months
  • Open Information: (10) Public records about bankruptcies (11) Tax liens (12) Bill passing etc.

 

Learn more on the fundamentals of your credit report, the duration of which it’s updated, and various ways to fix problems within the shortest possible period. Remember, the longer drag on removing claims, the harder you faced in filing domestic appeals.

 

How credit bureaus obtain your information & determinant factors?

Where does individuals’ information within those Credit Reports originate? In a broad overview, financial institutions and debt-financing firms are responsible for furnishing your credit report information to the relevant credit reporting agencies; Experian, Equifax and TransUnion – major bureaus requiring such information to match requests.

 

Other relevant governmental agencies such as debt collectors, local jurisdictions (county), state and local governments appeared to contribute information in a transparent manner. It is imperative to garner tons of data from various properties so as to mitigate biased responses and judgments, argued Mishkins [2013].

 

If you’re still curious on the transparency and openness in information-sharing, please note that most companies dealing with your raw data might not openly reveal your personal information to the above 3 local reporting companies. Instead, they do report on the account status to either one of them only, on a monthly basis. Experian [2012] rolled out statistics on maintaining credit reports of more than 220 million active participants in the U.S – one of the largest credit bureau companies in town.

 

Fact: A research study conducted by Experian made a shocking discovery; approximately 79% of all reports possessed certain kind of mistakes albeit not meaningful to most companies in decision-making.

 

What to do in obtaining a credit report?

In 101 Ways of Financial Habits [2012], getting your credit report within the first quarter is highly recommended. Trend analysis depicted that big asset purchases often occurred in the first three months of the year. Big-ticket items are mainly; new auto loan, college degree or new house. Be meticulous in reviewing it, ensuring that most (best if all) of current items listed are accurate. Wealth Caliber [2013] forewarned on potential identity thefts across the States hence you’ve to be careful and not hesitating to initiate a dispute once there is any discrepancy.

 

One good practice is to perform semi-annual review on your credit report. Since you’re entitled up to three free report cards [Eagle News, 2015], do make it a good habit to collect from them. Make full use of whatever resources on hand to deal with inaccurate issues or handle false claims in a profession manner.

 

Where to obtain your credit report for free?

As mentioned earlier, not needing a credit card, you may obtain your free credit report from either of 3 nationwide credit report agencies. Annual-Credit-Report [2012] encouraged consumers to obtain theirs from Experian [2009], Equifax and TransUnion – all cards being refreshed on an annual basis.

 

According to Fair Credit Reporting Act [Experian, 2010], an individual may request for a free credit report if he/she has been rejected by the following circumstances: Employment, Insurance and Debt. You’ve personal rights to contact the disapproved service and request for the name and contact information, in which they obtained information regarding your credit file. Please undergo a thorough review on the your free credit report within 60 days or approximately two months.

 

When & how to review your credit report?

Here is a breakdown on ways to reviewing your credit report:

  1. Objects recognition: upon collecting your credit report, be sure to be able to tally the objects listed with your receipts or purchase agreements. If not, seek redress from the company that claims to be a creditor and making sure that you are not subjected to a growing threat – identity theft.
  2. Transparent details: one of the common errors is information of customer accounts being wrongly entered. Yes, it is still a practice today in missing out latest account updates. Contact the respective agency and start filing a legal dispute – 60 days to answer your query.
  3. Credit utilization ratio: if you’re having difficulties in calculating your debt utility ratio, check out here. A good balance falls under 30% of total credit limits, as a cardholder, and high utility ratio could signify poor financial habits.
  4. Debt portfolio mix: possessing several liability classes can open-doors to high-quality credit fico scores. Examples are credit cards, mortgage loans, auto installments and other insurance premium bills.

 

How does information listed in your credit report affects FICO scores?

In summary, your personal information (stated above) affects your individual credit scores, beginning from the date you signed for installments/mortgages, history of payments till the overall debt utilization factor – being the key determinant variables.

 

If you’re clueless on how to improve credit scores, let your personal credit report be of a helpful guide as to what you can rectify in a transparent fashion. It is also one of the most accessible option with no cost incurred over a 12-month period, thrice annually.

 

Find out more about the basis of credit scores here and significance of different score ratings, with a host of relevant topics on credit scores at our unique Frequently Answered Question (FAQ) portal!

 

Quote of the Day: “You do not need to be wealthy to be disciplined, but you needed to be disciplined in order to be wealthy – LIG Corp [2018]”

 

Relevant Topics

» What is Credit Repair: Find out how to use your free credit report here!

 

This article was originally published on January 12, 2014. It has since been updated.