How Do Credit Reports Work?

Credit reports are a collection of information regarding your bill paying history. This includes loans, credit cards and any other payment that is due for a service. Your bill paying history includes how well you pay your bills on time, how well you repay loans and how much credit you have available. It also includes your monthly debts and information that helps a lender decide if they want to risk giving you a loan and how an interest rate should be calculated for you.

A credit report is pulled every time you apply for a loan, especially when buying houses, cars, property or other credit cards. This information is reviewed by the lender. Of course if your credit reports states negative information such as a bad payment history, this is considered before giving you any credit or loans. Even if you credit is not completely spotless you can still get loans and credit cards but your interest rates may be higher.By itself a credit report does not state whether your credit is good or bad. It simply gives the information based on your credit history which goes back approximately seven years. Whether you receive the credit or loan you were seeking completely depends on the lender.

The way credit reports are figured starts with the foundation of credit report agencies. The organization used today is an accumulation of four groups, the general public, branch correspondents, businesses and consumers whom are reported, and subscribers. There are many credit report agencies today. They all try to work effectively to appeal to the four groups that use their services.

You may wonder exactly what information is used to make up your personal credit report. It starts with personal information that identifies you. This information includes your social security number, your name, your address, previous and current employers, your date of birth and your spouse’s name if applicable. Next your credit history is factored in the process. This includes payment history with mortgage companies, banks, finance companies, retail stores, and anyone else who has given you credit. Each account has detailed information concerning when you opened it, how much credit is currently in use or the current amount of a loan, what type of account it may be, your monthly payments and when they are due. Additionally such information as missed payments and whether an account is closed or a loan has been paid off will also be included.

Public records are noted so items such as tax liens, bankruptcies and court judgments can be considered, as well. Report inquiries are another aspect of credit reports. This part of your credit report will list all the recipients of your credit report. The final information that is on your credit report are any dispute statements. These are included so lenders are aware of any disputes you may have had with previous creditors. Both creditor and consumer statements are allowed to be shown per the credit bureau.

There are quite a few things that a lot of people think is included in a credit report but they are actually not part of the credit reporting system. These include criminal records, bank account balances, income, race, religion and driving records. Health is not listed either except for any bills incurred, they will still show up as a debt.

Basically, all of your personal and credit information is given to a credit bureau. A credit bureau, or credit reporting agency, is a central agency for collecting, classifying and distributing information about your credit. They get this information from your creditors that send monthly statements for all of the credit card holders or loan recipients. This works for creditors in return. When you apply for a credit card, they contact a credit reporting agency and review your credit information before deciding if they want issue a credit card to you. Essentially, they work together collecting and maintaining credit history for consumers.

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