credit report analysis and understanding your credit report
Not being able to understand and interpret your Credit Report? Just read on to find out how you can do it with ease.
Credit Report is a detailed report of an individual's credit history prepared by a credit bureau. It is used by a Creditor or an Employer to assess the creditworthiness of a consumer. Components of a Credit Report On the basis of the Credit Reports issued by the three major Credit Bureaus viz. Equifax, Experian and TransUnion, we can say that any standard Credit Report comprises of the following few components.
1. Applicant's Information: Generally this section of the Credit Report contains the following points: your full name, any known alias, current and previous addresses, social security number, date of birth, current and past employers. This section contains the basic information of a consumer and helps creditors to judge the authenticity of the consumer. Employment status of the consumer gives some idea about his income potentials.
More the consumer is closer to his retirement age; the lesser is his chances of paying back from his salary. Previous address of the consumer is important to verify the future and present financial obligations towards that residence.
2. Fraud Indicators: Credit Bureaus check the personal information given by consumers, with their own database. This section lists mismatches and is, thus, indicative of the discrepancies and wrong personal information (for example, social security number) submitted by the Consumer.
3. Profile Summary: This section contains the following credit information: total installment balance, total real estate balance, total revolving balance along with total past due amount, total monthly payment, total real estate payment, total tradeline etc. Profile Summary gives an idea about the current monthly expenses of the consumer towards his existing debts along with total number of inquiries including those conducted during the last 6 months is also noted in this section. This is done so that the lender or user of this report can judge the authenticity of the financial information provided by the debtor. This section also includes the total number of tradelines, divided into satisfactory and derogatory part. This reveals the debtor's responses and attitude towards different lenders on repayment of existing debts.
4. Credit Scores: Credit score is a number that lenders use to estimate risk. The factors which have been considered to determine such score are also explicitly stated in the Credit Report. It is the core part of the credit report and indicates the actual financial position of the debtors. Higher the score lesser is the risk on disbursal of loan and vice-versa. After considering the financial situation of a consumer, credit bureaus assign a score against each debtor.
5. Tradelines: This section includes the list of all creditors, like credit-card companies, utility companies and other lenders. The accounts are listed by the type of loan. The date you opened the account, your credit limit or the loan amount; any co-signer of the loan and your payment pattern over the past two years are all stated in this section. Tradelines contain details of each and every loan that the debtor is having currently.
6. Collection Record: At times creditors lose patience with debtors and the lenders may face problems getting back their loan. This section of the Credit report shows the status whether any debt of the consumer is passed on to collection agency or not. The report marks such accounts as "collection." And if a consumer pays back the collection agency, then the status shows "paid collection." This section rates the seriousness of the debtors towards repayment of particular credit.
7. Recent Inquiries: This section includes the names of those who have obtained copies of your credit report within the past year (two years for employment purposes). This clause helps to indicate the authenticity of the financial data provided to creditors & employers (as the case may be) considered while preparing the report. With the increasing credit number of inquiries your credit score falls, as greater number of inquiries show that people are having doubts about your financial status.
8. Public Record Information: The information included in this section is as follows: State and country court records on bankruptcy, tax liens, monetary judgments and non-monetary judgments. Bankruptcy, tax liens etc. are determining factors for your credit score. For example, if a debtor has declared Bankruptcy under Chapter 7 or 13 it will put a negative mark on his credit report as it indicates that in future debtor may face similar crisis and the lenders may face problems getting back their loan.
A Credit Report is nothing but a reflection of debtor's behavior towards his debts, highlighting the actual financial strength, weakness, current repayment pattern and future repayment potentiality of the debtor. A good credit report is thus the best key to convince creditors and employers. A consumer thus needs to be more focused on removing the negative points from his Credit Report in order to increase chances of getting easy loans in future.
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