Credit Report BasicsIn its nascent stage, credit reporting was done by a store clerk who would note the purchase amount of a buyer and put it into a ‘cuff’– the cuff being a paper tube the clerk would wear on his wrist. This eventually led to the idea of collating all the information collected from these clerks, to be used by merchants who could refer to it before giving out credit. Only a select group could view these records – they included lenders and merchants who also came to be known as the mutual protection societies and roundtables. These people, however, had limited geographical scope. The first credit report agency was established in the 1830s, the first formal third party agency with a national presence. Today, there are more than 1000 credit reporting agencies in the US, providing credit information for a price.
Most of us use loans to buy cars or mortgage to fund our home finance. We also use student loans and credit cards to obtain credit. However, we cannot expect that all this credit is provided by the lending company based on trust, or a hunch. There has to be some kind of verification before a company lends a person any money. It would be impossible for each company to separately investigate every customer approaching it for credit. To get information on a prospective customer’s credit history, the potential credit provider contacts a credit rating agency or a credit bureau and asks for a credit report.
A credit report can be considered a record of your credit history. It contains information on past borrowings, and also reveals when you made the repayment and if there were any late payments or bankruptcies. This report is used by lenders to determine your credit worthiness. In case of a bad credit report you might get a loan at higher interest rates or, worse still, not get credit at all.
The credit bureau does not advise the lender on whether the loan should be granted. It only provides information; the decision to lend rests solely with the lender. The credit bureau will not provide your credit report to one and all but only to those who have a genuine purpose for viewing it – for instance, a potential lender, a potential employer, a government agency, an insurer or someone with a legitimate need to access such information will be entertained by the credit bureau.
The Anatomy of a Credit ReportTypically, the following information is included in a credit report:
- Personal information: This section will include your full name, current address and previous addresses, date of birth, social security number, employers (past and current), and, if relevant, the same information about your spouse too.
- Credit history: This section will have a record of all the accounts you may have with banks, credit card companies, retailers and the like. The type of loan you took is also included – a student loan, a credit card loan or an installment loan, for instance. Also included is your repayment pattern for the two previous years. This will mean that a person who reads your report will know everything about your credit history. If you happened to take a loan from a bank and made late payments, your potential lender will probably know of it as well.
- Public records: This section includes information on your tax liens, monetary judgments and bankruptcies if any.
- Credit inquiries: This section provides information about those who received your credit report copies within the past year or two.
- Dispute statements: In case you find that some information on your credit report is not correct you can file a complaint and put your side of the story in not more than a hundred words. This statement, called the dispute statement, then becomes a part of your credit report and can be seen by the user of the report.