If you want to apply for a mortgage loan, a personal loan, a credit card or insurance, the lenders will view your credit report to know whether or not you have the affordability to repay the loan. The credit report contains details of your personal and financial information.
What a credit report is
It is a file that contains your financial record. It records the detailed information about your loans, credit card accounts, and current balance of your loan amount. It also records how regularly you pay off your loan and whether or not in the past any action was taken against you due to nonpayment of your debts.
The credit reporting agencies
Consumer reporting agency or CRA collects and sells information about your credit activities. The most common type of agency is the credit bureau. The three major credit bureaus are Equifax, Trans Union and Experian. They take a charge for supplying the information.
Type of information on your credit report
Usually the credit bureaus give 4 types of information. These are:
1. Personal information: In this section your name, current and previous addresses, date of birth, social security number, past and current employers will be noted. If you are married, the same information of your spouse will also be included.
2. Credit history: This section notes your credit history like, the accounts you have with banks, utility companies, credit card companies, retailers, whether or not you have taken a loan, (if you have taken a loan it will also record the type of loan, how regular you are in making the payments, the loan amount, any co-signer of the loan), etc.
3. Public record information: If you’ve ever record of bankruptcy, foreclosure or tax liens, it will be recorded in this section.
4. Latest inquiries: In this section the names of your creditors or employers who have asked for your credit history in the past two years will be recorded.
Errors in report and method to remove these
Errors may appear in the credit report due to misspelling of your name or address in mails, out-of-date information, mistaken identity, etc.
Whenever you spot an error in your credit report, you should immediately notify the credit reporting agency. The company will do verification on the basis of your complaint and rectify the error. This process may take up to 45 days. Once the error has been removed, the fresh copy of your report will be sent to your employers and lenders who have received it within the last six months.
It is important to have a good credit report, because, a good report will determine your eligibility to get a loan amount of your choice in the future. A positive report will also enhance your credibility to your employer if you’re applying for a new job.