A credit report is a complete summation and overview of an individual consumer's financial responsibility in managing lines of credit. When someone takes out a credit card or mortgage and begins making monthly payments the credit report shows the status of the loan, the loan amount and if the consumer is making timely payments for the right amount. This overview is important to many organizations such as other lenders as well as prospective employers. All of the various pieces of information contained in a credit report are condensed down into a single figure called a FICO credit score.
A credit report may be one of the single most important aspects of an individuals life. It is essentially an ongoing report card of how a consumer behaves with regard to money and financial management. Act responsibly and a consumer will have a high credit score which will determine whether or not they get that auto or home loan and if they do get it what interest rate you will pay. After irresponsibly and a consumer will have a low credit score which will limit the types of loans they can get, result in higher interest rates costing them more money and possibly lead to an inability to obtain employment or rent an apartment. Needless to say a credit report is fundamentally crucial to having a happy and healthy life allowing you to do what you want to do when you want to do it.
Credit reports are generated by the three major credit reporting agencies in the United States which are Equifax, Experian and TransUnion. Up until recently if a consumer wanted a credit report they had to pay for it but a new federal law requires the three credit reporting agencies to provide one free annual credit report upon request. This allows consumers to monitor their credit reports checking for inaccurate information or red flags such as identity theft. If a consumer finds inaccurate information they will need to contact the credit reporting agencies to correct the errors which will help raise their credit score. Take advantage of this free service and it may make a world of difference in what you drive, where you live or what job you can get.
When looking at a credit report they often contain three separate distinct areas of information. The first area is a summary of the individual consumer including all personal information such as Social Security number and full name as well as most recent addresses and contact information. The second area, and probably the most important, summarizes all lines of credit including home loans, auto loans and credit cards. This area shows current balances, available credit as well as payment history. The final section shows any adverse information including but not limited to accounts outsourced to collections, charge-off accounts and lawsuit judgments.
It can't be emphasized enough how important a credit report is for individual consumers. A good credit report with a high credit score opens up a world of possibilities for the types of loans and employment and consumer can obtain at the best possible interest rates. A bad credit report with a low credit score can result in menial employment, clunker automobiles paid for in cash and renting apartments the rest of your life. While it may seem trivial to have a charge off or bankruptcy this negative information can stay on a credit report for up to 10 years meaning it can limit what a consumer can do for a decade.
When someone asks what is a credit report the answer is that it is the single most important piece of personal information as it pertains to functioning in a consumer driven economy. Every individual should open a checking account and get a low limit credit card directly out of high school and then work responsibility to pay off debt every month and build savings. Establishing credit early and often will ensure a healthy financial future and provide innumerable opportunities.