Credit Reports

All You Need to Know About Credit and Debt Consolidation


Credit Reports

A number of lenders, including credit card companies and banks, use the score generated from credit reports to assess the potential risk posed by lending money to an individual. Credit reports can actually make credit less expensive and easier to access. Every legal U.S. resident is entitled to a free copy of their credit report once per year. Each of the three credit agencies has to provide yearly reports: Transunion, Equifax and Experian. Note: these reports do not include a credit score, but scores can be obtained for a small fee online. The fee is regulated by the FTC under the Fair Credit Reporting Act.

A credit report is a tool that contains information regarding payment history, current debt, loans and other financial information such as whether you've previously filed for bankruptcy. Personal details such as where you work and live, your criminal history and whether you have ever been sued are used to generate a report that assesses your trustworthiness.

Credit reports and their associated scores are often used to determine the price of insurance. Homeowner's insurance and auto insurances are just two types that often take advantage of credit reports to assess potential risk and prices offered. National credit reporting agencies have been using credit reports to generate specialized insurance scores since the 1990s. These reports indicate the level of insurance risk. Studies have indicated that people with higher credit scores and better credit reports have a lower claim history and often pay less insurance if their score is used to generate payment terms.

Credit reports are used to indicate to financial institutions whether you are a suitable candidate for loan approval and, if you do qualify for a loan based on your history, what rate of interest should be charged. Money lenders are not the only people who used credit reports to assess your stability, prospective employers, rental property owners and insurers may also use your credit report results to make a decision.

Some employers have even used credit scores in their hiring process. TransUnion representatives have been known to market credit score reports to employers, although in some U.S. states there has been legislature introduced that limits the use of a credit check during this process.

Since this tool is used to determine the outcome of a range of applications, including rentals and insurance, it is important to check that financial information and personal information supplied is correct. A yearly check on your credit history will help to determine factors including whether any fraudulent activity has recently taken place or errors that may negatively affect your current rating.

The information supplied in your credit report is used to generate a credit score. A credit score indicates your level of credit risk at any given time. A low score may affect your ability to obtain a loan or rent a home, so it is important to check that all details are accurate. Lenders may use their own credit scoring system using information on your credit report and each company may have a different method of assessing your risk. A credit report does not typically include score information, but they do normally offer advice on how to improve a credit report.