What is a Credit Report?
A credit report is a document that contains the records of all your borrowing and repayment history. It contains all your credit activities that you have indulged in. it contains your loans, when you took them, from whom, when did you repay them, current balances, how regular you are in repayment etc. In case you did not pay your dues on time and any action was taken against you, then your credit report will also contain that.
Any company that collects and distributes the credit information of people is called CRA (Consumer Reporting Agency). These companies collect all the information regarding credit activities of people, and store this information in their databases. They then charge a fee in case someone (for example, your financial organization) wants to know your credit ratings. There are many CRAs, and the most common one is Credit Bureau.
There are 3 chief credit bureaus operating all around the country, along with a number of smaller organizations that serve the local markets.
Credit Rating
Credit rating is your overall rating that is derived from your credit report. This rating tells about your charging, borrowing and the repayment activities. If you have a good rating, then you can reach your financial goals easily, but with a bad credit rating, you will face many financial hurdles.
Your credit report influences many things, like getting a job or owning a house, or a car. For this purpose, it is very important to keep a clean and good credit rating. You can do so by not taking extra debt, and by paying your bills on time.
Who can see your credit report?
Your credit report is not public property and hence cannot be viewed by just about anyone. There are only certain people/ organizations that can view your credit report.
1. Lenders who have granted you a loan, or are considering granting you a loan
2. Employers considering offering you employment, reassignment, or promotion
3. Insurance companies considering you for their insurance policy
4. Government agencies that are monitoring your financial status
5. Any other party that has a legitimate reason to view your credit report
Apart from these parties, in case there are orders from the federal court, then the credit bureau is bound to furnish the credit report. Also, if you write to them to provide your reports to a third party, then they can show your reports.
Even you can get a copy of your credit report. Now you may wonder why you would want a copy of your own credit report. Well, this is important if you want to avoid unwelcome surprises. When you apply for any loans, such as car loan, house loan etc, it is best that you view your credit report before the lending organization views it. Though you might have a clean history, there might be some errors in your report. These errors are quite frequent, and you can get them corrected before you apply for a loan.
UPDATED December 20, 2011:
To touch more on how important your credit score is, the urban myths of people not being hired because they had bad credit are not myths at all. Some occupations in certain agencies have credit score requirements. As mentioned, having a copy of your credit reports before applying for any financing is wise as it put you in a position of knowing where you site numerically in the eyes of FICO. Not all credit reports are the same, as they come from the three different credit reporting agencies mentioned above. To keep learning more about your credit score, your right and credit report access , the U. S. Federal trade comission wrote an excellent piece entitled Your Access To Free Credit Reports.
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