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Credit Reports Explained
Have you wondered why some people are denied credit by financial institutions? One of the most probable reasons why a bank or a mortgage firm may deny you credit is when you have a bad credit history. This information is obtained from credit reports. So what is a credit report? A credit report is a statement showing your financial relationship with lenders and your current repayment situation and loan accounts.
An individual may have more than one credit report depending on the number of institutions he or she transacts credit business with. These reports are domesticated in a database called a credit bureau and are used by financial institutions, credit card providers, and other users to determine if you are suitable for borrowing from them. This information will also be useful in determining the interest rates these companies will loan you money.
Other users such as landlords, insurance companies will also use credit reports to determine if they will approve your application for the services they offer. Therefore, credit reports carry a huge significance as they will give you an edge or deter you from accessing certain important things in life. This is the reason why you need to guard your credit report to avoid being turned away by such service providers.
Who Puts Together Credit Reports?
Credit bureaus or credit referencing agencies are concerned with compiling reports from lenders. There are three companies in the UK that compile and manage credit information about citizens. Banks, credit card issuers, auto lenders, debt collecting firms, and mortgage companies voluntarily provide credit bureaus with the information to these companies. These companies are: Experian, Equifax and Callcredit
The information that is maintained or shared may include the following:
- The time of you apply for an account
- When an account is opened
- The amount loaned or the credit limit
- The outstanding balance
- The status of repayments
- If your account is currently in collection
Credit reporting companies may also buy public records like liens, bankruptcy filings, as well as court judgments to help build their database.
Where To Check Your Credit Report
The law provides that credit reporting bureaus should provide credit reports to people seeking to know their credit records. You can also ask for their report online by making a written request. It is important to obtain the credit report from all the three credit reporting agencies, as this would provide you with comprehensive information about your credit standing. This is because different credit referencing agencies obtain credit information from different lending institutions and you are likely to see an overlap of the information.
When Should You Check Your Credit Report?
You can check your credit report any time, but is always advisable to check it in advance before applying for a loan, a mortgage, or a credit card. It is also a good idea to check it regularly to ensure that you correct any anomalies that may arise or to see if you have missed any payments unknowingly. Checking your credit reports often does not affect your credit scores or rating.
Who Is Interested In Your Credit report?
By applying for a loan or a mortgage, you give your lender the permission to check and review your credit report or information.
How to Calculate A Credit Score
A credit score indicates how well or bad you have been able to manage your debt obligations. Bad marks on your credit record such as late repayments will remain on your credit record for over five years. Other factors that may not negatively affect your credit score include your income levels, employment status, bounced cheques, utility bills and overdraft fees. Remember that your employers as well as landlords can access your credit record report when they want to assess your eligibility for services they render. Ensure to correct your credit record early enough to avoid the inconveniences that come with a poor record.