Credit Report

Publication Date :

07 Dec, 2023

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Table Of Contents

What Is A Credit Report?

A credit report refers to a detailed record of an individual or entity's credit history compiled by credit agencies to ascertain their creditworthiness. It serves as a reference point for deciding on credit approvals for credit cards, rental applications, mortgage rates, and personal loans.

Lenders use it to decide the interest rate and the amount of loan for applicants. It contains credit accounts, public records, payment history, and inquiry data. Moreover, it is available to its consumers for free on an annual basis to check errors and the health of their financial records. It is pivotal for consumers to get employment, loans, and insurance.

What Is A Credit Report?

A credit report is a comprehensive credit history created by credit agencies that is used to determine an individual's creditworthiness and is crucial for obtaining credit approvals.
It contains personal information, credit accounts, credit inquiries, public records, debt collections, credit score, and creditor information, assisting in credit score calculations and providing contact information for creditors.
Moreover, it can be obtained by following the steps mentioned above, like visiting AnnualCreditReport.com, creating an account, verifying identity, etc.
These provide comprehensive information about public records, credit inquiries, payment history, and credit accounts, while a credit score is a numerical rating.

Credit Report Explained

Credit Report refers to a detailed record of an individual's credit history compiled by a credit reporting agency or credit bureau. It influences an individual's ability to secure credit, obtain job rentals, and shape their financial future. In the United States, one can obtain a free credit report from each of the three major credit reporting agencies. These are Equifax, Experian, and TransUnion—they publish reports once every 12 months through the official website. Credit scores are derived from these reports, ensuring uniformity in lending practices and facilitating informed decisions on the part of lenders.

Furthermore, the three credit bureaus actively gather credit details of individuals and entities from creditors, lenders, public record sources, and landlords. All this information is then converted into a report of credit. Thus, it provides an overview of a consumer's credit and financial history during a specified period. The report is updated every month, incorporating inputs obtained from the sources above. Insurers, employers, and lenders meticulously examine an individual or entity's report to assess their creditworthiness and eligibility for loans, credit cards, jobs, and insurance premiums.

Moreover, it entails many implications, influencing a lender's determination of interest rate, loan approval decisions, and terms of loan extended to an applicant. Applicants with positive are granted preferential treatment by lenders, receiving lower interest rates, more favorable terms, and easier loan approval without the need for collateral or a guarantor. Conversely, applicants with adverse reports need help in securing loans. Therefore, they often receive higher interest rates, unfavorable terms, or even outright rejection by lenders, employers, and landlords.

It has wide usability, such as monitoring credit health, highlighting any errors or fraud in the reports, making credit decisions easy for debt management, achieving financial goals, and protecting an individual's financial identity.

These contain all necessary information about the lender, loans, and individual credit history. Moreover, it has flowing main points in it as contents:

Personal Information: Includes consumer's name, address, social security number, and possibly employment information. It helps to identify the consumer but does not play a role in their credit score calculations.
Credit Accounts: Lists all credit accounts, plus the date opened, payment history, account balance, and credit limit or loan amount.
Credit Inquiries: Contains all credit inquiries where a consumer has applied for new credit in the last two years.
Public Records: This includes any financial data related to bankruptcies, tax liens, or court judgments.
Debt Collections: Shows up if a debt was turned over to a collection agency.
Credit Score: Some of these reports may include a three-digit number called a credit score summarizing the credit risk per the report generated.
Creditor Information: Comprises contact information for all creditors so that one may contact them if one spots any inaccuracies.

Examples

Let us use a few examples to understand the topic.

Example #1

As per a recent report, in 2024, mortgage originators will have to pay extra for access to consumer credit reports, which will rekindle concerns from trade associations and mortgage lenders.

In 2024, all mortgage lenders will pay the same price—which will be greater than the current price—to Fair Isaac Corp. (FICO). This business owns the rights to the widely used methodology to estimate consumer credit risk, regardless of their volume. The early 2023 tier-based pricing system is no longer in place as a result of the modification.

Despite notable variations in these goods, FICO will continue to collect the same per-score payment for gentle pulls and hard pulls in the upcoming year as part of a strategy that began in 2023.

Out of a $50 (or more) tri-merge report and score package, FICO will receive about $10 total for all three scores. Therefore, this still represents a small portion of the total cost of a tri-merge report—roughly 20% or less—a FICO representative stated in a statement to HousingWire.

According to FICO, it will receive between $2 and $8 for each of the three score tiers in 2023 from a $40 to $50 (or more) tri-merge report and score bundle, as well as from an average of $3,800 in closing expenses. Mortgage trade associations and other stakeholders reported that mortgage lenders experienced pricing increases in 2023 ranging from 10% to 400% when compared to 2022.

Example #2

Let us take a look at a sample report of John Doed below to understand its essential elements:

SAMPLE CREDIT REPORT
PERSONAL INFORMATION Name: John Doed Previous Address(es): New York, New York, 33521 Same Employer Name: Company A Hired: 01/2014 Date of Birth: January 1, 1970 Social Security Number: 020-00-0580 Phone Number(s): 111-171-1231 Position: Assistant Accountant Date Reported: 03/2023
PUBLIC RECORDS Bankruptcy filed - 05/2014, District Court Case Number: 000210 Lien filed - 06/2015 Case Number: 000220
ACCOUNT INFORMATION Collection Account - CAR LOAN Creditor: Jane Doed Type of Account: Individual Original Amount: $950 Status: Collection account,$200 past due as of 04/2018 Recent Payment: $10 Account Number: 0000021 Date Opened: 01/2014 Type: Installment Monthly Payment: N/A Account Holder: John Doed, Date of Status: 04/2018 Terms: N/A Recent Balance: $202 ACCOUNTS IN GOOD STANDING - HOME MORTGAGE Creditor: Jane Doed Type of Account: Individual Original Amount: $166,000 Status: Open, never late Recent Payment: $2,019 Account Number: 0000002 Date Opened: 03/2022 Type: Installment Monthly Payment: $2,019 Account Holder: John Doed Date of Activity: 03/2022 Terms: 180 months Recent Balance: $125,020
INQUIRIES Companies that requested credit history : Company A, 06/2015Company B, 04/2017Company C, 02/2020

How To Get?

There are many steps to getting these reports for use in one's financial success. Hence, listed below are steps to get it:

Knowing Rights
The Fair Credit Reporting Act allows for one free copy of a report annually, using any of the three nationwide credit reporting companies.
Visit AnnualCreditReport.com
Visit the only approved website to obtain a free credit report.
Create an Account
In order to create an account, provide the following information: name, address, Social Security number, and birthdate.
Verify Identity
Provide other details (such as phone number or email address) to support identification.
Fill Out the Request Form
Submit personal information, including the place of residence history, if moved within the last two years.
Choose Reports
Choose reports from the three national credit reporting companies or only two, like the Transunion & Experian credit reports.
Answer Security Questions
Answer individualized security questions to verify identity while maintaining privacy.
Review Report
Check the report carefully for mistakes or fraudulent activity. Bring up any inconsistencies with the information supplier and credit reporting agency.
Dispute Any Errors
If mistakes are discovered, file a dispute with the reporting agency that provided the report.
. Save Report
One can print or save a copy for their records; further copies of the annual credit report are free after a year.
Monitor Regularly
Regularly check credit reports for any changes and use the weekly free report option on AnnualCreditReport.com for continuous monitoring.

Credit Report vs Credit Score

A customer's eligibility for financial products plus creditworthiness depends on both credit report and credit score. However, both work differently, as shown in the table below:

Credit Report	Credit Score
It contains extended details of public records, credit inquiries, payment history, and credit accounts.	A numerical rating ranging from 300 to 850 gives ratings to credit reports.
The three central credit-reporting agencies, TransUnion, Experian, and Equifax, compile the reports.	Lenders use various mathematical models like FICO and VantageScore to calculate credit scores.
One can view or extract the credit report of their account three times a year.	To view credit scores, one has to pay a small fee.
Any error on the credit report automatically lowers the credit score and means a higher rate of interest plus lower money in the pocket.	These form the basis of the calculation of credit score.
For a better credit report, one must review every element for mistakes and search for areas of improvement.	Moreover, any error in credit score becomes costly as it may badly affect loan, credit card, or other financial product eligibility.
For a better credit-report, one must review every element for mistakes and search for areas of improvement.	The more accurate the credit report becomes, the higher the accuracy of the credit score obtained.

Frequently Asked Questions (FAQs)

1. How to dispute a credit report?

The first step in disputing an inaccuracy on a credit report is to contact the organization or firms that supplied the data. One must then write arguments on why one believes something to be incorrect and include copies of any supporting documentation. For more details, visit the Consumer Financial Protection Bureau.

2. How many free credit reports one can get?

Every year, one may visit Annual Credit Report.com to obtain a free copy of the credit report from each credit reporting bureau. Frequent updates guarantee that the data is correct and assist in identifying identity theft early on.

3. How to remove late payments from a credit report?

One can dispute a mistaken or historical late payment on the credit reports by contacting the credit agency that generated the record.

4. How do you remove collections from credit reports?

Once the debt has been paid off, the closed collection account can be removed from the credit report by writing a letter seeking a goodwill deletion.