Credit Reports - What You Need to Know?
A Credit Article Contributed by Nithya K
Introduction - Credit Reports, Credit Bureaus, and Credit Files
Credit and credit reports can become one's nightmare unless properly managed. For this one should know everything about the functioning of credit bureaus, credit files, and credit reports. Before going deeper into the topic of a credit file and credit bureau, we need to know what are credit reports and how they differ?
What Should I Know about Credit Reports?
A credit report is a factual record of a person's credit payment history.It is given to companies or individuals by credit bureaus for granting credit. The purpose of a credit report is to help a credit grantor decide whether to grant credit based on the credit payment history. Basically, a credit report is a report generated from the credit file, that is a database maintained by a credit bureau containing the person's credit history.
More than 200 million people in the US have a credit card, a car loan, a home loan, or an education loan. Almost every one of them has a credit file. The credit data included in the credit file is obtained directly from the companies giving credit and from government agencies like legal courts. When a person applies for any type of credit or financing, a credit report is generally obtained, including information about at least one of the three major credit bureaus.
Apart from the "Big Three" on an average, there are several smaller credit bureaus that the credit grantors look at before passing the credit.
Types of Credit Reports
Generally there are various types of credit reports as mentioned below:
Consumer credit reports
Property Manager credit reports
Business credit reports
Employer credit reports and
Mortgage broker credit reports
A Business credit report is used to find out a businesses's worthiness, and include information on the primary business function and SIC code. The report also includes company background information, company statistics like years in business, number of employees, sales etc. Sometimes the report also includes payment trends of other companies by SIC group, showing how a company compares to average.
An employer credit report contains information like current and previous employment verification, education verification, criminal records check etc.
The Mortgage broker credit reports must meet all standards set by HUD, FHA, VA, FMHA, FNMA and FHLMC.
Now What Does a Credit Bureau Do?
A credit bureau collects and maintains information on people but they are not affiliated to the Government.People have rights and protection under the Fair Credit Reporting Act. The credit bureau is a for-profit organization and sell personal information.
A credit bureau makes money by gathering credit information from credit grantors and lists all this information in the credit file This information is sold to other credit grantors or anyone who wants to take a peek into the credit worthiness of a person. The credit bureau gets all personal information from the credit lenders. The information about the person's credit worthiness reaches not one but many credit grantors who are looking at the particular credit file.
Even a small late payment reflects in the credit file and this fact is reported very quickly to at least one of the major credit bureaus and is promptly added to the credit history. Credit reports not only show the current credit management by the particular person, but also contains history of credit repayment.
