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Credit Reports
Credit reports serve as the lenders' fact sheet for determining whether an individual will be a good or bad borrower. Personal finance advisers often warn us to avoid late payments as much as possible, not to accumulate a mountain of debts, and to manage our credit cards well since these things are crucial on our credit reports. So what really is so important about these credit reports anyway?
Credit reports contain information on how well we pay our bills, credit cards, and loans, how much debt we have, and other pertinent data that will give creditors a solid idea of whether we are low or high credit risk. People who have good credit reports will have greater chance of getting a loan at lower interest rates. The opposite is true for those who have bad credit ratings.
Credit reports are compiled by credit bureaus. In the United States the three biggest national credit bureaus are Equifax, Experian, and TransUnion. Local and regional credit agencies, which are often affiliated with any of these three, gather credit information about individuals. If you apply for a credit card or a loan, for instance, and it is approved, the information you have provided as well as your payment history are forwarded to the credit bureau. The accumulation of these data them forms your credit report. These credit reports are reviewed by banks, credit card companies, and other lending entities whenever we apply for loans, credit cards, and other forms of credit.