Reading a credit report

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    Reading a credit report
    Reading a credit report

    Our society lives and thrives on credit. There are more and more lenders offering loans to different people. The law entitles you to obtain a copy of a credit report every 12 months. Many of these loans, such as credit cards and personal loans, are unsecured. This means that the lender is offering loans based on the reputation of the borrower rather than the number of assets he has as collateral. It is therefore essential that they have the required information before they make their decision. This information is provided in the form of a credit score.

    Lenders Collaborate: Almost any loan that you take can be traced back to a few lenders. Thus, all the lenders have most of the information, amongst themselves, they need regarding lending the money. It is for this reason that they have set up credit bureaus. It is in their interest to submit information about every transaction with every borrower. The aggregated information gives the prospective lender a good idea about the creditworthiness of an individual. Every lender works for it and gets the benefit.

    Periodic Reporting: Lenders report periodically to a third-party organization. Usually, they report every month or so.

    Point System: Instead of considering the vast variety of information that a credit report may bring along, lenders usually look at a score. The point system has been well developed and provides the lender with a good idea of the creditworthiness of an individual. For every favorable credit deed, such as paying bills on time, there is a positive score. Similarly, for every negative deed, there is a negative score. This point system ensures that lenders do not have to deal with complex information.

    Differential Interest Rates: People with good credit scores get the rewards in the form of lower payments, while people with bad credit scores are penalized.

    You are also expected to read it and ensure that the information is accurate and that your case is not being misrepresented. Since the credit score is such an important part of everyday life there are agencies that have been formed for the speedy redressal of complaints. However, most people do not understand a credit report and its contents. A credit report contains the following information:

    Personal Information: The first section of the report contains personal information. This is usually how the banks identify you. Information here includes your first name, last name, social security number, taxation details, among others. Your employment details may also be a part of this report.

    Summary: Here all the credit accounts that you have are listed down. These are generally classified into real estate accounts, revolving credit accounts, installment type accounts, etc. This page will also show a snapshot of what is owed on these accounts at a particular point in time. There will also be details about how many accounts existed in the past, how many are operational now and how many have gone delinquent. Your credit score is also listed in this section.

    Details: These accounts have hyperlinks attached to them. This means that a credit reviewer can choose to get the information about your financial behavior on any of the accounts that are displayed in the report.

    Other Information: This section shows details of other information, such as alimony payments, child support payments, taxes owed and fines imposed due to drunken driving. This information may change and is most likely to be inaccurately listed in the records. Hence, one must pay special attention to such information.

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