What is in a Credit Report?

If you've been reading our articles about credit repair, then you know the importance that your credit report will play in the process. Many people have a vague idea of what a credit report is, but don't truly understand the various part of it, and how they can work for or against you. To help, we've put together this comprehensive article that will explain exactly what it is, and how you can make it work for you.

How Can You Tell if You Have a Credit Report?

Every person who has ever bought something on credit - like purchasing a car or a house or using credit cards - has a credit report. When you apply for credit, the person or company who is considering offering it to you will look at your credit report to see how responsible you have been with payments in the past. In addition, many times when you apply to rent a home or apartment, your credit report will be checked.

An employer may also check your credit report. In short, with this single document, there are many people who will decide whether or not you are trustworthy to lend to, work with or lease to. Can you see how important a clean credit report is?

How do Bad Marks Get On Your Credit Report?

Let's say that you have bought a car on credit, and you make $200 payments per month. But one month you had some unexpected medical expenses and were three weeks late with your payment. Did you know that most likely that payment is now on your credit report? The lenders who will see that mark don't know about your medical expenses - they only see one thing: that you made a payment late, and that will put your credit worthiness into question.

The same holds true for all the other marks on your report. When you are late paying a lender, or don't pay them at all, they automatically report it to the credit reporting agencies. On the other hand, if you always make your payments on time, that will be reported as well. Most large companies have automatic systems set up in place and people who work specifically on reporting both good and bad payers to the agencies.

All credit reports contain basically the same information, and the lenders know where to look in order to gather the information needed to decide whether or not to lend you money. Below is a general breakdown of what you'll find in your credit report.

A Credit Report Breakdown

Personal Information

In this section, all of your personal information will be listed. Your legal name, previous and current addresses, birth date, social security number, employer, and your husband or wife's name. Additionally, your report could include specific information about your job, such as your salary and previous employment information. Finally it will say whether you own or lease your home, and the financial figures related to those payments may also be listed.

So, just how could the personal information on your credit report affect you?

Scenario #1: Imagine that you were trying to lease a house, and had experienced some problems with your former landlord. You didn't necessarily want the new landlord to talk to them, so you listed another address as your former address. When the new landlord ran a credit report check, they find your old address anyway and can talk with your former landlord.

Scenario #2: Another possible scenario is ff you were changing jobs and your potential employer ran a credit report check on you, they could find out what your previous salary was. Imagine that you had asked for a great deal more money from the potential employer - they may be likely to counter with a lower offer once they find out your current salary.

A lesson to be learned from these scenarios is that even if bending the truth of your situation slightly seems justified, be aware when your credit report may be involved and offer information consistent with the information someone might find in your report. A lender will look more favorably on a potential borrower if they see no inconsistencies between the information provided and the information found on the credit report.

Payment Information

All of your past payment history is listed on your credit report. For example, if you use an American Express card, they will report to the credit reporting agencies every month whether you paid on time or were late. If you have ever been referred to a collection agency, this would also show up in this section of the report. In addition, a potential lender will be able to see exactly how much you owe. Each lender will list the balance that you owe to them, and so if a potential lender knows how much money you earn, they will look at how much you already owe and how much you are asking to borrow to determine whether or not you would have difficulty paying the debt back.

This comes into play when someone is applying for a loan to purchase a house because the lenders use set formulas to determine how much debt is too much to be acceptable.

Inquiries

Every time you ask to borrow money, a note is made on your credit report. What this means is that a lender can easily see if other people have turned you down for a loan that perhaps you are trying to get from them. If you have too many attempts to borrow on your report, it is considered a red flag for lenders.

In addition, every time someone requests a copy of your credit report for employment purposes, a note is made. This can be particularly bad if you are doing a great deal of shopping around, or if your current employer checks your credit report and discovers that in the past month, several people have requested a copy of your credit report for employment purposes. In other words, they would know in a hurry if you were looking for another job!

Public Records

Anything that is done in a court of law will show up on your credit report. This can include bankruptcy, a tax lien, foreclosures or personal judgments. This can affect you in many ways. For instance, if a company decides to check your credit report before doing business with you and discovers tax liens or judgments, they may hesitate, they may be less likely to chose you or your company.

Summary

Anybody who has ever had to make regular payments or who has requested credit has a credit report in their name.
Lenders, landlords and employers my all request your credit report.
Bad marks appear on your credit report when you make late payments, miss payments, or are turned down several times for credit.
A credit report includes your personal information, information about payments you have made, your current balance on debts, a list of requests for your credit report and any public records such as bankrupt and tax liens.

As you can see, your credit report plays a significant role in your life, weather you are aware of it or not. Now that you know what they are, it's time to learn about the agencies that produce them in What are Credit Reporting Agencies?.