As a consumer it is to your benefit to fully understand how credit works and every aspect of what is involved when you apply for any type of credit, including the major credit reporting agencies that hold your credit report file. If you understand what banks and other creditors are looking for to extend credit to you then you can monitor your financial future and accept only the best choice.

When you apply for credit, lenders want to know about you, your employment history, your income, your assets, and most importantly they want to know about your credit history. A creditor will get a lot of information directly from you by a credit application, then your credit bureau report to verify this information and confirm references and credit scores. Then upon evaluation of your credit application combined with your credit report, the lender will determine your credit risk and make a final decision on whether or not to grant you credit and at what rate of interest they will charge you.

Let's take a deeper insight into the factors that can either be an asset or liability at the time of the application for credit - your credit report.

What is a credit report? Your credit report is your financial resume, a summary of your financial reliability, containing both personal and credit information. Your credit report is obtained from credit bureaus, also credit providers, employers, insurers, landlords and other enterprises that have a legitimate need for such information.  The Federal Fair Credit Reporting Act (FCRA) is recommended read.

What's in my credit report is divided into these main areas.

PERSONAL PROFILE IDENTIFYING INFORMATION - this is where all your personal information is recorded - your name including any alias and possibly your spouse’s name, current and previous addresses, Social Security number, date of birth and current and previous employment.

Credit history - This section contains a detailed list of your credit cards, loans and mortgages, is currently active accounts in the past and closed. The information reported includes, type of account, when it was open, the high balance or limit, monthly payments, date of last payment, how the account is paid including any late payments, date of last activity and a rating of how the account was paid.

Public records - information from local, state and federal courts will be receive and includes records of bankruptcies, foreclosures, liens, monetary judgments, court payments, and child support payments.

Credit score - your credit report scores are a rating determining your credit risk and the likelihood of defaulting on a loan. Lenders use this score as a tool to assist them in deciding whether to borrow money. Your credit score is a snap shot of your credit at that point in time, and can change on a daily basis. The score is a three digit number range of 300-850 with the most common scoring models . Statistics show that the higher the number the less likely you will default on a loan, therefore you are a good credit risk and the lower the number the greater chance there is for you to default on your payments, making you a greater credit risk.

If your credit score is low, you may still be able to borrow money, but is most likely to pay a higher interest rate and you are at the mercy of the creditor. However, the higher your credit score is the more you are in-charge; you can get any loan at the best possible rates with no restriction.

Where does the information on my credit report come from? Your credit history information is gathered at companies called credit bureaus or credit reporting agencies. You may recognize the three major credit bureaus, Equifax, Experian and Trans Union and there are many. They receive information voluntarily from creditors and the credit reporting agency updates and maintains your credit report file with this information.  Equifax, Experian and Trans Union are independent of one other, and it is important for you to know that they do not exchange information. This means that it is quite possible that you not only have a separate credit report and score with each of them, but that they may contain different information. There is hundreds of smaller credit reporting companies across the country, however, these are the most popular credit companies and the largest and the most important offices for banks and financial institutions.

Rick Sax, Inc. 

The Credit Repair Law Firm, Chartered