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What are Credit Reports?

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  • Written By: D Frank
  • Edited By: L. S. Wynn
  • Last Modified Date: 28 November 2016
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Credit reports contain information about an individual's background and credit history, and these reports are used to determine if someone is credit worthy. In short, if you pay your mortgage late, file for a bankruptcy, or are denied a credit card, all of these items will be recorded in your credit report.

Equifax, Trans Union, and Experian are the three major companies that compile credit information. These companies keep track of your addresses, mortgage payment history, checking accounts, credit card payment history and other similar information. They also list the balances you owe on your mortgage as well as credit cards. If you are a prompt payer of bills, this will be reflected in the credit reports. However, if you are habitually late with your monthly mortgage payment, store and bank credit cards, and have a judgment against you from a lawsuit, this will also show on your credit report.

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Based on your credit history, you are given a score. This score, in effect, determines the degree of your credit worthiness. It tells a bank or lender what the risks are if they offer credit to a consumer. For example, if your credit history demonstrates a lengthy on-time bill payment history and low outstanding non-mortgage debt, your strong score will allow you to get a loan with a great interest rate to buy that new car you've had your eye on. A poor score may result in an outright credit denial, or the loan for that very same car may come with an extremely high interest rate.

In order for a lender or other creditor to obtain a credit report, the consumer must give them authorization. If you have been denied a loan or credit card and you are wondering why, it would be wise to order your own credit report. While Equifax, Trans Union and Experian have been in the credit reporting business for quite some time, they are by no means infallible. You many find mistakes and inaccuracies on your report and such items can certainly weaken your credit score.

If you discover any inaccuracies in your credit report, you should notify the three major companies and supply them with the corrected information. If you, for example, had a judgment against you from a car accident, but you paid the judgment off, you should supply the companies with a "Release and satisfaction of judgment" so they can remove the judgment from your credit file.

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anon324168
Post 4

I dislike the fact that TransUnion forces you to sign up for your credit score "before" (for a fee of course), they will let you see your free credit report. I got my other free ones from Equifax and Experian, but not TransUnion unless I signed up for a free credit score for a week to a month, all conveniently charged to my own personal credit card. Surely this is bad business ethics and perhaps should even be labeled a scam. I eventually requested a mailed copy, which i haven't received yet.

Testy
Post 3

@epiphany5 - I agree with the advice that you gave. It is very important to know what your credit score is before applying for a loan. Doing so can help to prevent you from being surprised by the lenders.

However, often times, lenders will run credit reports on you from all three of the credit agencies and use the score that is the highest to determine what your rate of interest will be. That could possibly be what happened when you bought your first new car. Perhaps the dealer used the Experian or Equafax report in calculating your car loan interest rate.

I am not trying to defend car dealers. I just wanted to share some insight as to how some of them operate.

epiphany5
Post 2

Never, I repeat, never go into a car dealership looking to buy a car without first knowing what your credit report says and what your credit score is. Car salesmen want to get as much money out of you as possible. They might trick you into thinking that your credit score is higher than what it actually is so they can charge you a great interest rate on a loan.

This happened to me when I bought my first new car. I knew very little about credit, although I had always paid my credit cards and loan payments on time or before the due date. So when the dealer told me what he calculated my credit score to be

, I was kind of shocked. I was too excited to get my new car, so I just signed the papers and started paying an astronomically high interest rate for my loan. I later decided that I wanted to get my own score from Trans Union and sure enough, the score I got was much better than what the car dealer told me.

Now, before I buy a car or take out any kind of loan, I always know what my credit score is before I walk in the door. That way, I avoid getting bamboozled by these sneaky creditors!

sehiggins
Post 1

I have just finished taking a personal finance class at my university. The professor lectured extensively on credit reports and credit scores. All the information presented in this article is in agreement with what he taught me. Thanks for writing this article and refreshing my memory.

My professor also said that a person is allotted one free credit report per year from each of the three major credit bureaus. In other words, everyone gets three free credit reports a year. Any additional credit reports will have to be paid for by the person requesting the report.

There is only one place to get a free annual credit report. Do not fall for those commercials with the catchy jingles

from independent companies that say that they offer free credit reports. There are most certainly fees attached to any report that they give you, and chances are the report will not be accurate. Only get a credit report straight from one of the three federally approved bureaus.

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