What is a Credit Report and What Does it Include?

  | Published: 31 October 2020 | Last Updated On: 07 January 2021

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Credit Report and Why it’s important? 

Whenever you apply for a loan or credit card, or even a mortgage, the lenders will certainly ask to see your credit report. This report is an indicator of how the loan seeker manages his or her credit. It is an important factor that the lenders take into consideration to understand how efficiently you manage your finances and whether they should extend credit to you or not. Therefore, this report is an essential part of the potential creditors’ or lenders’ decision-making process. Other than this, even potential employers and landlords can access your credit history to decide whether or not to offer the job or lease to you. This report is also reviewed by your insurance providers before approving your insurance scheme to make sure that you will be able to regularly pay your installments. Even utility services like getting mobile phones can sometimes involve looking at your credit history.

A credit report is a detailed summary of your payment records along with your credit history of all your credit accounts. Apart from this, it also contains a myriad of other information that is reported to the credit bureaus by the different creditors and lenders who have lent money to you. 

Beyond ascertaining whether you qualify the creditor’s requirements for a loan, there are other reasons why a credit report is necessary. The information depicted in this report helps the creditors discern a possible fraud early and take the required actions.  

Any incorrect information mentioned on your credit report can have a negative impact on your loan approval probability or decrease your chances of qualifying for the best interest rates available in the market. In case you notice any errors in your credit history that can negatively impact your credit score, it is best to dispute them at the earliest so that you can boost your credit history. 

For the above-mentioned reasons, it is extremely vital to constantly review your credit report in order to make sure that it is complete and devoid of any errors.

What Information does a Credit Report Include?

Credit reports tend to include a diverse range of information regarding you and your different accounts, public records among other things. The following kinds of information will be displayed on your report irrespective of the bureau:

Identification Information: This section of your credit report lists out your personal information like your name, date of birth, social security number, and address. If you live in India, your PAN card number as well as your Aadhar card number will also be mentioned. This identifying information on your report however is not used to calculate your credit score. The information mentioned can be:

  • Full name or alternative names used in previous applications for credit like your name prior to marriage
  • Date of Birth
  • Current as well as past addresses
  • Phone number linked with your credit accounts
  • The email address linked to your accounts
  • Current and previous employers mentioned on your credit application
  • Social security number

Credit Account Information: This information is specifically reported by your creditors and lenders to the bureau. This information includes the types of accounts- auto loan, mortgage, educational loan, etc. It also mentions the date these accounts were opened, account balances, credit limit as well as your payment history. This does not however include all your credit accounts as some might have closed and therefore are excluded from your report for a certain period of time. 

  • Name of the lender or creditor
  • Current and past credit accounts for the past 10 years
  • The date of the opening and closing of the account
  • Status of those accounts
  • Balance
  • Payment history
  • Credit limit or the loan amount
  • Utility accounts

Credit Inquiries: Credit inquiries are noted down each time your credit report is sought out by the lenders, creditors, NBFCs, banks, insurance companies, etc, from the credit bureau. The credit inquiries are of two types- Soft inquiries and Hard inquiries. 

Soft inquiries are those that can be a result of your own checking of your credit reports. They can also be a result of companies providing you with pre-approved credit offers or insurance, or when your current creditors and lenders do a periodic evaluation of your accounts, commonly known as account reviews. These soft inquiries do not have any impact on your credit score. Doing a regular review of your credit report can help you notice any incorrect or incomplete information available on your report. It is also useful to monitor any suspicious activity that could end up in probable identity theft. 

Hard inquiries occur in the event of individuals or companies like an insurance company, credit card providers, or a bank reviewing your report and credit history because you applied for their services. These services include an application for a new credit card, a new loan, etc. These inquiries can negatively impact your credit score for they remain on your credit report for a period of two years sometimes. This impact will however lessen with time. 

Collection Accounts: Collection accounts include the debt that is overdue and was sent to the collection agency. These might include not only your credit accounts but also your accounts with retail stores, mobile phone providers, hospitals, or even retail stores among many others.

Bankruptcies and Public Records: Sometimes unfortunates circumstances land people in financial troubles ending in bankruptcies. Filing for bankruptcies is also recorded in your credit report and are carefully taking into consideration by credit bureaus. All the details like the filing date of bankruptcies as well as the chapter, that is the type of bankruptcy are archived. These include:

  • Liens
  • Bankruptcies
  • Civil suits and judgments
  • Foreclosures

What information does not appear on your Credit Report?

Credit reports include a sea of important information that plays a significant role in deciding whether or not your application will be approved by your lenders. Yet there is some information that does not feature in these reports, namely:

  • Income
  • Bank account details
  • Marital status
  • Education qualifications

These details are not included because they do not have any impact on your credit score whatsoever. 

In a Nutshell

Your credit report plays an extremely pivotal role in keeping an eye on your financial status so that one can easily get credit, that at the best rates possible. It also helps keep one vigilant about any fraudulent activity that can misuse your private and sensitive information. So, getting well-versed with your report is important in order to understand what the creditors see when you apply for some credit.