What Is A Credit Report

A credit report is a history of your payments, not just a snapshot of where you are at the moment, says Maxine Sweet, vice president of public affairs for Experian, one of the three major credit reporting agencies.

A credit report is a crucial document that reflects your credit status. A credit report is a summary of your financial reliability for the most part, your history of paying debts and other bills. A credit report is a profile of your financial life that's compiled by a credit reporting agency or credit bureau. A credit report is used by a lender to help determine whether a person qualifies for a particular credit card, loan, or service.

A credit score is like the numerical version of your credit report. Credit scoring is the process of using a proprietary mathematical algorithm to create a numerical value that describes an applicants overall creditworthiness. Credit score determines credit worthiness and with high credit worthiness borrowing capabilities increase.

Credit scores typically range from about 300 to 850. Scores above 700 are a sign of financial health and can earn you relatively low prime interest rates and favourable lending terms. Scores above 700 generally are considered to be good credit scores and scores above 775 are considered excellent by most lenders.

You can think of a high credit score as a merit badge, if you will. You will be able to obtain more credit much more easily and creditors and lenders will feel much more comfortable loaning you money, as you have obviously been a reliable borrower in the past. While you can obtain a free copy of your credit report each year, you will need to purchase your credit score.

With the adoption of risk-based pricing on almost all lending in the financial services industry, this report has become even more important since it is usually the sole element used to choose the annual percentage rate (APR), grace period and other contractual obligations of the credit card or loan.

Reports may contain information on accounts that have been long closed or paid off. A lender may perceive many inquiries over a short period of time on a person's report as a signal that the person is in financial difficulty and is looking for loans and will possibly consider that person a poor credit risk.

When creditors report an excessive number of late payments, or trouble with collecting payments, the score suffers. Derogatory information can generally remain on your credit report for up to seven years, except for bankruptcy information, which may be reported for 10 years. Note that it is not the credit reporting agencies that decide whether a credit history is adverse, but depends on the individual lender.

What is not in my credit report? Your credit report typically does not contain information about your checking and savings account balances, brokerage accounts, medical history, race, sex, religion, national origin, or your driving record nor in most cases will it contain details of your rental agreement if you live in a tenanted property.

Building or re-building a credit report that has become bad does not have a quick-fix situation. The first step to improving and repairing a credit report is to ask for help. The only thing that can fix a credit report is time and a positive payment history.

A good debt management or credit repair company can show you the correct techniques to bring your finances under control. Once you have rebuilt your reputation your credit score will grow and you will find credit at good terms and interest rates much easier to come by.