The Purpose of Credit Reports

You have a credit card or two, you make your monthly payments and you know exactly what your credit score is, but do you know what the purpose of your credit report is? Better yet, do you know what goes into your credit report? Thanks to the credit bureaus, your credit history acts as a running profile of you as well as your finances.

The three main credit bureaus are Experian, TransUnion, and Equifax - companies that monitor and record your credit history. As private companies, they receive their information for several different sources including banks, department stores, mortgage companies and other companies that offer you credit. With this information, the bureaus can establish a credit history reflecting your past and present credit behavior.

Credit reports, therefore, act as a financial thumb print. In other words, they offer a glimpse of an individual’s financial bio-data. With this information at hand, creditors can address an individual’s credit risk to both spend and repay money. If a person racks up debt and can’t pay it back, their report will reflect that. On the other hand, if a person maintains good credit behavior and has a clean report, they will be eligible for loans in the future.

A clean report can also increase the amount of credit available to you. With the credit report supplying a background of how you manage your money, your debt and your credit, credit companies use it to determine your amount of credit worth and credit risk. Maintaining a good report is vital to attain additional credit and loans.

If a creditor denies your application for credit, it is likely in large part due to a negative credit report. If this is the case, the creditor must indicate that a poor report was indeed the reason for the rejection. They must also supply the name of the credit bureau which provided the report. According to the law, you have every right to know what is in that credit report. The bureau is obligated to share everything they have on file about you concerning your credit history.

Credit reports are affected by debt and when you find yourself in that situation, you have several debt relief options to work your way out of debt. Credit counseling and debt consolidation help you make your debt more manageable. Once you can conquer your debt, you can be looking at a much nicer credit report and all the privileges that go along with it.