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Q: What is a Credit Report?

December 17, 2013 12:53 PM

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A credit report is a list of your credit-related activity for the prior seven years. This can include activity related to car financing, credit cards, store accounts, and home loans. It can also include information associated with accounts from creditors such as cable companies and cell phone companies. Bankruptcies can also appear on your credit report for up to ten years. Credit reports state whether your accounts are currently in good standing or whether they are delinquent. The report will also include information about late payments and accounts that have gone to collection. The age of your credit accounts will also be listed. This information is used by lenders to determine your creditworthiness and whether or not to approve your loan application. If you are applying for a car loan at a bank or a car dealership, you will be asked to grant permission for the lender to run a credit report.

There are three primary credit reporting bureaus: Equifax, Experian and TransUnion. Each of these credit reporting bureaus maintains a credit report on all consumers with a credit history. The three credit reports may not contain matching information. Lenders are not required to report information to all of the three credit reporting bureaus. As a result, one credit reporting bureau may have more information than the other two. Due to the fact that information can vary among the bureaus, it is always important to check your credit reports on occasion to make certain the information is up to date and correct on all three reports. Each credit reporting bureau offers you the option of completing a form to correct any errors. You will typically need to provide written documentation that supports the need to correct an error.

All of the items on your credit report receive a grade. Your final credit score is calculated from that information. Consequently, any errors on your credit report should receive immediate attention, as they can negatively affect your credit score. A short credit history can also have a negative impact on your credit score. There are various models used to determine credit ratings. The FICO system is the standard credit scoring system used in the United States and many other countries.

The largest percentage of your credit score is determined by your payment history, including collections, charge offs, repossessions, late payments, bankruptcies, foreclosures, settlements, judgments, and liens. Debt level is also an important factor in determining your credit score. This category is comprised of the type and amount of debt you carry. This includes revolving debts, such as credit cards, and installment debts, such as car loans and home loans. The third category is open debt. This is the type of debt that must be paid monthly, such as pay in full charge cards. Other factors affecting your credit score include credit file age, account diversity and credit inquiries. You are legally entitled to receive one free copy of your credit report from each of the three credit reporting bureaus annually.

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