Credit Reports
What is a Credit Report?
A credit report is a report which contains information about your borrowing history; how many loans and credit cards you have, their limits and how you make your repayments - whether on time or not, how much credit is available to you and what loans and credit cards you have applied for. This information 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 can repay the debt. If you have a lot of outstanding loans, several credit cards and pay your bills late then you are likely to 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 will interpret this information themselves, usually having their own “suitability” standards in place. In most cases, if you have a bad report you will not get credit, or if you do you will be charged a very high interest rate.
How is your Credit Report made?
The report is made by Credit Reference Agencies who collect the information regarding your monetary status from previous and current 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.
