How to Understand the Types of Credit Reports

Turn on the radio or television and you’re likely to hear a commercial urging you to get your free annual credit report, or to call a specific company if you’re swimming in debt and they’ll throw a life-ring to freedom your way. Many people don't really understand what a credit report is and the types of credit reports there are. Breaking down the different types of credit reports, how they’re compiled, and how that information is used to assess your credit worth makes it easier to understand credit reports.

Instructions

Difficulty: Easy

1. There are three main credit bureaus that receive information from the suppliers of consumer information. That information is then compiled together to form what is known as a credit report. These credit reports are used to by creditors and lenders in evaluating whether extending credit or a financial investment in you would be a good or bad risk for them.
2. Credit card issuers create reports containing information about the amount of credit extended to you, your history of payments, and even information about the types of things you spend money on the most, and submit that information to the three main credit bureaus for inclusion in your credit report.
3. When you take out a loan with a bank, mortgage agency, or other lending agencies, they each create reports of this information for submission to the credit bureaus for inclusion on your credit report.
4. Public records containing information about divorces, convictions, bankruptcies, IRS seizures, bank loan defaults, and other public records containing information that could be considered a detriment to a consumer's overall credit can all be used in the compilation of a credit report.
5. A three-in-one credit report is a singular report that contains all of the information contained in the files of the three main credit bureaus and used to create their individual credit reports on consumers in one comprehensive report.
6. Credit reports are available from each of the three main credit bureaus if you prefer to have them separated.

Tips & Warnings

• Remember to request your credit report once every 12 months so that you will know what information is being kept and shared with creditors and lenders about you.
• Act on inaccurate information you discover in your credit report so that it doesn’t continue to hurt your credit rating.
• Learn what your credit score is and how that affects you when you seek to open lines of credit. Learn too, the ways in which you can increase your credit scores.
• If you are experiencing credit problems and don’t know where to begin in order to repair damaged credit, seek out the advice of a competent credit counselor. They can help you to understand how best to repair damaged or bad credit.
• Don’t open lines of credit you don’t really need as this can appear to some creditors and lenders that you have credit problems when in fact you don’t. They may falsely assume you have opened extra lines of credit to pay for ones you already had.
• Requesting copies of your credit report more than once every 12 calendar months could cause concern for the creditors and lenders looking at such activity. A credit counseling agency can request these credit reports, provided you give consent, without it showing up as a negative in your credit report.