Credit Reports and Checks
Under the term of a credit report is understood the borrowing and repayment record of an individual or a company. It is actually the display of the credit history of a person with all the particulars about late repayments or history of bankruptcy and it directly interconnected with credit score. The state of a credit report of a person and its history are important in a pretty great number of situations.
An individual credit report contains official information about all the credits that a person both repaid and is holding at the moment. This is the record of all the loans for the past 6 years. It is created by credit agencies and is available to an individual or a lender if requested.
It contains detailed repayment history and all current and previous addresses of a person for the given period. Besides, it also provides the information of any cases of court judgments and the records of bankruptcies filed, if any. The latter come from public registries. In order to make verification an individual’s identity and residency easier, the information from local councils is also included.
There are four main categories that draw up credit history of a person and they are:
- Settled accounts;
- Active accounts;
- Defaulted accounts;
- Delinquent accounts.
The information about all of them is kept in the credit report of a person for 6 years even after the credits were repaid.
Besides, a report reflects all the credit accounts history in full detail, starting from the recent credits and proceeding to the older accounts. They display the accuracy of the repayments and whether there were any faults, late repayments or the like.
A credit report of a person is based on the credit checks. The state of both is an essential argument for a lender who is deciding on the approval of the application for a mortgage or a credit card, for instance. The score is the figure that indicates the level of risk a lender will take providing a borrower with a credit.
- A credit check is an action performed by a lender who considers an individual’s application for any type of credit.
Commonly lenders apply for a credit agency or bureau to provide a personal credit report. By doing so a lender verifies personal information such as date of birth and addresses of a person, both current and previous; also social security number and employment and history information. Besides, which is more important, a lender looks at the credit history of a person and estimates the potential risks.
Credit bureaus record all the repaid and current credits, laying emphasis on the timely and late repayments, defaults, and the like. A lender that conducts a credit check decides upon an individual’s creditworthiness on the basis of these facts. It is very likely that if a person’s credit score is low and a report in general leaves much to be desired (bad credit), a lender is very likely to answer with refusal.
Payday lending is one of the sectors in this business, where a credit report does not play as a significant role as in traditional lending (i.e. bank loans). Short-term lenders do take credit score into consideration; however, their lending policy is usually much more lenient. Still, it should be noted that a lender might (and has a right to) perform a credit check.
- A credit check is performed every time when a person applies for a loan. The majority of lenders tend to ask a person’s credit report from more than one source in order to be able to compare them.
The process of lending, or application for any form of credit, takes time not in the last place because of credit checks. As long as a borrower applies for a loan, a lender sends the request for a credit bureau for a report. In the U.S. there are three main credit bureaus that deal with the individual credit score estimation and credit data collection. They are TransUnion, Equifax and Experian.
One important thing about credit records that they are supposed to be accurate, up to date and correspond to the facts. This is both beneficial for borrowers and lenders as it simplifies the process of crediting. However, the thing is that a lot of people do not actually look into their credit reports far too often. It is very frequent that mistakes in the credit reports are made and this costs a person a refusal in the end. Identity fraud is also very common. Therefore, it is recommended to be aware of the state of a credit report.
According to the Fair Credit Reporting Act of every person is eligible to get one free copy of a credit report from each agency once a year. Any other copy will cost around $15; however, in exceptional cases, free copies can also be provided.
A person is able to get his or her credit report in the following ways:
- The most convenient way is to apply online. At AnnualCreditReport.com every person can get an annual credit report as this is the only authorized source. Besides, one can go to TransUnion, Equifax and Experian and request a credit report from each one and compare them.
- A person can also apply by mail;
- Or by phone. Call (877) 322-8228.
Taking care of a credit report is essential as it is the basis of a personal success in loan application. With the outstanding score and record a borrower is in a beneficial position as lower rates are available as well as better terms.
It is essential for the majority of lenders in the public financial institutions, banks in the first place, for a borrower to be creditworthy and be able to provide the proof of the past proven record of repayments that were made accurately in time and within the framework of the terms agreed.
- It has already been mentioned, that a bad credit rating will not do any favor to a borrower; however, a person without any credit history can have as much trouble as well.
What is interesting to a lender is a person’s ability to make consistent repayments on various credit types and it is essential that a lender could trace it.