Credit Report

Credit reports are documents containing detailed information about a person’s credit history. The information is collected by credit bureaus who also publish these reports. Credit reports help lenders determine the creditworthiness of an applicant.

To put it simply, based on the information provided in a credit report, lenders decide whether or not an applicant qualifies for a loan.

The US is home to 3 credit reporting bureaus – TransUnion, Experian, and Equifax. These bureaus collect information about consumers' financial habits and actions to draft a credit report. The reports published by all three companies follow a general standard except for a few minor variations.

You’re probably wondering how these credit bureaus manage to acquire your financial information. Well, credit bureau companies have signed agreements with financial institutions that you do business with. These businesses send all your financial details to credit bureaus, which the bureaus then use to create credit reports.

It is a completely legal practice. Though financial institutions are not necessarily required to share your financial details, most of them choose to do so as the information helps them make better decisions about offering credits to certain applicants. It can be thought of as a symbiotic system with mutual benefits.

What kind of information is found on a credit report?

Apart from the information related to your identity, credit reports contain important details related to your credit cards, bank account type, payment history, account status, balance, loan amounts, and loan balances.

You are also likely to find public records relating to foreclosures, tax liens, bankruptcy, and repossessions. All this is usually detailed under a different section.

Credit reports will also have a list of businesses that have gone through your credit history recently. This happens if the businesses have received an application from you or are researching you for future promotions. These checks are referred to as enquires.

These detailed inquiries will only be published in your own personal version of the credit report. The version that is given to lenders will only contain inquiries that were made by businesses that received an application from you.

Importance of credit reports

Apart from keeping lenders informed, credit reports are also requested by landlords and employers. The purpose is the same – to determine your creditworthiness. A landlord may find you trustworthy if your credit report is generally positive.

Apart from that, credit reports can help you understand your own financial situation and help you plan better.