When you apply for a credit card or loan, your credit reports are thoroughly reviewed by the lenders. You have a good chance of getting a loan or credit card approved if the credit reports portray a positive history. But if there are missed or delayed payments in the reports, there is a good chance you may be denied.

What is a Credit Report?

A credit report is a record of your credit activities. It lists all of your credit card accounts and loans, their balances, and how regularly you make your payments. It also shows any actions that have been taken against you for evading or delaying payments. It includes information such as payment of bills, repayment of loans, available credit limit, monthly debt and so on. A potential lender can assess your financial status through your credit report.

Credit Reporting Agencies (CRA), also known as Credit Bureaus, gather this information from merchants, landlords and lenders. They pass this report on to businesses so that your application for credit can be evaluated. Based on different criteria, lenders decide whether you are a good credit risk or a bad credit risk.

A credit report usually includes the following:

Personal identifying information – This includes your name, address, telephone number, social security number, previous and current employers, date of birth, etc.

History of Credit – This includes your history with banks, payment of bills, current account information, and available credit. If you have missed or delayed a payment, or even closed an account, it will show up in this section.

Public Records – Judgments given by the court, bankruptcies, tax liens, if any, appear in this section.

Report Inquiries – This section includes all the credit granters who have received a copy of your credit report, as well as others who have had the authority to view it. The concept of pre-approved credit arises from this section.

Dispute Statements – If there have been disputes associated with your credit or financial statements, it appears in this section. Credit bureaus allow creditors and consumer alike to make such statements.

Credit Report vs. Credit Score

Credit reports are often confused with credit scores. While a credit report is a statement of your financial status, a credit score is a numerical expression based on statistical analysis of a person’s credit files. It represents the credit worthiness of an individual. The credit score is sourced from credit bureaus.

Your credit rating is drawn from your credit report, which outlines your borrowing, charging, and repayment activities. A good rating helps you reach financial goals; a poor rating limits your financial opportunities. It is imperative to have an effective debt management plan to protect your credit rating by making loan and bill payments on time and by not taking on more debt than you can handle.