Credit Reports

What is a Credit Report?

 A credit report is essentially a report which contains information about your bills, how you pay them and how frequently, how much credit is available to you, how many loans you have taken and how you pay them back and other such information which will help a potential lender decide whether you are worthy to be lent money or not.

Who uses a Credit Report?

If you have ever had the experience of applying for a loan, a credit card or a line of credit for any purchase then you have probably had your credit report checked. The lender will check your report for information indicating how you manage your finances. The lender is looking for clues as to whether you will pay the debt or not. If you pay your bills irregularly or if you have a lot of debt you will probably be refused credit.

Anybody from whom you wish to enter into a financial commitment will probably check your report.

Why do you need a Credit Report?

Credit Reports help lenders lend responsibily. If someone is in debt and there is no realistic chance of them paying the money back, it is better for all involved if the lender is made aware of this situation prior to any financial agreement being made. This is what the report does.

The report does not show if you are a bad credit risk or a good one, it just gives data concerning you, to the lender. The lender can interpret this information how they see fit and will have their own “suitability” standards in place. In most cases though, if you have a bad report, you will not get credit. If you do, chances are you will pay over the odds for it.

How is your Credit Report made?

The report is made by agencies known as Credit Reference Agencies or Credit Bureaus who collect the information regarding your monetary status from merchants and lenders. This information is then sold to companies before they make decisions regarding customers and financial commitments. This procedure actually helps money lenders to make the right decision.