Credit Report

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Definition

A credit report is a record statement that has information about an individual’s credit history derived from numerous sources, including banks, credit card companies, collection agencies, and governments. This report is prepared by the credit bureaus. It is created when an individual applies for credit or borrows money for the first time from bank and other financial institutions. Lenders send regular updates of the borrower’s payment history to the credit reporting agencies. In this way, credit bureaus collect an individual’s financial information and create credit reports based on that information.

The report mainly includes summary of credit history such as the type of bank or credit card accounts along with the numbers, detailed account information – related to balances, credit limits, account opening dates, and their standing condition – whether they are past due or in good standing. Various lenders use this report along with other necessary details to determine an individual’s creditworthiness.

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LAYMEN TERMS

Just like a report card that an individual gets in school which has all the details of how he/she performed in each subject, same way a credit report is a detailed list of how an individual manages his finances – a historical record of how and when the individual paid his/her bills, when and how much money or loan borrowed and paid back, how much debt he/she has, and how long the individual is managing credit accounts.

HOW DOES THIS TERM APPLY TO YOU

An individual’s credit report is important because it is used to calculate one’s credit scores; these numbers can have a huge financial impact on an individual’s life.

Suppose you need a rented apartment to live in and found one apartment of your choice which suits your budget too. However, it is not enough. The landlord would ask to see your credit report first before giving you the keys to the apartment or before taking the rent deposit from you. This is when you contact the credit bureaus like Equifax and TransUnion and request for a copy of your credit report by providing them your identification. Once the request is made, the credit report will be mailed to you within few weeks; you can also access the report online by paying a fee. After receiving the report, you can now provide a copy to the landlord to review your credit scores and based on his satisfaction of the score, the landlord would decide whether to rent you the apartment or not. Therefore, it is important to maintain a good credit score and check your credit report every year ensure that all the information on it are accurate and up-to-date.

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