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 What Is A Credit Report

Everybody knows that credit reports are just a common part of life. But many people do not really know exactly what a credit report is.

Here is a very simple example: What if one of your co-workers comes to you and says loan me $20 until payday. You think it’s no big deal, you got the money, you know them from work, and you don’t have any problem doing it. But then… before you actually give them the money… a couple of other co-workers who overheard the conversation comes up to you. One says I loan them $20 and they never paid me back. And the other says I loan them $25 and they paid me back either.

So what would you think about loaning the money?

This is exactly what a credit report is! It is a report made on you by others who previously gave you credit. Except they do not know you from work; they don’t know you at all. The only thing they have is a piece of paper that list what other people said about you.

Bill goes to XYZ business and applies for credit… then XYZ will check to see what other business have to say about Bill. And if they say Bill did not pay as agreed… Bill had a lot of late payments…or Bill didn’t pay us back at all. Then XYZ will definitely think twice about giving Bill credit. They may give Bill much less than what he asked for. They may charge an excessively high interest rate and other fees because they consider Bill a risk. Or they just deny Bill all together. This is how a credit report affects you

There are 3 major credit bureaus in the U.S. Experian, Equifax, and Trans Union. The actual title for them is credit reporting agency. Any other credit bureau, or agency, that may be in your local area is in some way affiliated with one of these three major agencies. Any person, or company, that pulls your credit is getting it either directly or indirectly from one of these three bureaus.

It is easy to see how, credit reporting agencies are very powerful institutions. We all already know that if you plan on applying for a loan, financing a car, even applying for renting an apartment the very first thing everyone will do is pull your credit. All it takes is one bad item on your credit report and it can cripple your borrowing power for years. But what is even worse, and what most people don’t realize, is that more and more credit reports are being used by employers, landlords and insurance companies. This is why it is so important to make sure that your credit information is true and accurate.

A recent change to the federal Fair Credit Reporting Act (FCRA) requires each of three major credit reporting agencies provide a free copy of their credit report, at your request, once every 12 months.

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What Is A Credit Report