Your credit report is a summary of your financial reliability. For the most part, it details your history of paying debts and other bills. Credit bureaus prepare credit reports to be used primarily by lenders in determining the credit worthiness of loan applicants. The wealth of information gathered by credit bureaus, coupled with the speed of today’s computer systems, explains why consumers can obtain loans and other services, many times within minutes.
The Contents of Your Credit Report
In general, there are four components to a credit bureau report. The first section contains identifying information including name, Social Security number, date of birth, current and previous addresses, telephone number, and employer. This information helps ensure the report generated pertains to you and does not erroneously contain someone else’s credit history.
The second section includes information contained in public records. This information generally comes from courthouse records and includes bankruptcy records, foreclosures, tax liens, court-ordered payments, and late child support payments. Lenders use the information to determine if you have previously defaulted on an obligation or have legal judgments against you. Derogatory information can remain on your credit report for up to 10 years.
The third section contains other credit history information, such as a listing of your credit cards and loans, and whether payments were timely. As with the public information discussed above, negative information can remain on your report for seven years, and bankruptcy information may remain for ten years.
The fourth section contains inquiries listing creditors, insurance companies, or other parties that requested your credit report. Typically inquiries remain on your credit report for two years.
Your credit report does not contain information about your checking or savings account balances, brokerage accounts, medical history, race, sex, religion, national origin, or your driving record.
How Do Credit Bureaus Gather Information?
Lenders voluntarily supply the information to credit bureaus on an ongoing basis. No federal laws require companies to submit the data. Why do lenders engage in this practice? Quite simply, having access to current and reliable information about a person’s credit history helps lenders make informed decisions and expedites the offering of appropriate financial products and services.
Who May Obtain Your Credit Report?
Not just anyone can gain access to your credit report. The Fair Credit Reporting Act defines who may obtain your report. Generally, a third party can obtain your report when considering applications made for a loan, a job, insurance, or an apartment. If you are paying on a loan or credit card as agreed, the institution where you have the account can obtain an updated credit report as part of its regular review of the relationship. This includes a review for warning signs indicating financial stress and potential problems fulfilling your obligations.
As you can see, your credit history can be a very valuable asset in your ability to manage your financial future. By handling your financial obligations responsibly, you create the opportunity to access credit at almost a moment's notice. On the other hand, credit obligations handled irresponsibly can become a matter of public record and severely limit your future access to credit.