A lesson on credit reports and credit scores

You probably have heard so much about credit reports but do you really know what its content mean? What is a credit report and why is it important? These are the two questions we want to answer today.

A credit report contains the record of a person’s purchasing trends, borrowing activities, including payment history and cases of bankruptcy. This is used to compute your credit score which in turn, become a basis for credit institutions to determine a person’s credit worthiness and usually decides how much interest and loan amount the borrower can avail. It is also used when applying for credit cards. Typically, credit reports are created with reference to one country. For example, a person who was a resident of China who previously had a Visa can be denied when he applies for Visa in the United States because of the lack of credit history. In the US, credit histories are sold and compiled by three credit reporting industries namely: Equifax, Experian and TransUnion. US law mandates that US citizens are entitled to at credit report per year from these three companies.

When you get your credit report, it is necessary to check for any mistakes that could’ve been made. For example, make sure that all purchases listed in the report were made by you. With the use of credit cards online, it is possible that someone else might’ve access to your account. Aside from this, take note of any existing loans in the report, and whether your payment history tallies with your own record. It is your duty to report inaccuracies in the report as soon as you can so that proper investigation can then proceed.

It is not the credit reporting companies that determines whether you have good or bad credit. In most cases, lenders have their own set of standards and it is by this that your credit rating is computed. Nevertheless, paying your bills on time will assure good credit rating.