Financial experts are constantly stressing the importance of your credit report, and you’d be wise to take their advice seriously. If you’ve ever used credit for any reason, like an auto loan or credit card, all of the activity will be collected on your credit report and your credit score is then calculated using the data, such as: payment history, amount of outstanding debt and your total available credit. Your credit history and score reflect how well you manage your finances and directly impact whether you are approved or denied for further credit. But it’s not just financial institutions that may be using your credit report.
Basics of Credit Reports
Many consumers are not aware that they have three separate credit reports – one from each of the major credit reporting agencies: Experian, TransUnion and Equifax. While each report can be a factor that a lender considers when reviewing your loan application, most institutions will review a minimum of two out of the three reports. That’s why it’s so important to know what behavior each report is showing.
Your credit report can be viewed by any company or individual who has a legitimate business need. You authorize access when you sign a contract for a loan or credit card application. Permission is also granted for requests related to credit, collections, rent, employment or insurance. Here are the types of companies and institutions that may regularly check your credit report:
Entities That May Review Your Report
Financial Institutions and Creditors
Banks, credit unions and other lenders need to review your credit report to decide whether to take the risk of approving your loan application. Your current lenders will also check your credit report, especially if you’re having difficulty paying your bills. Even if you haven’t missed or made a late payment, your creditors may monitor your report as a way of protecting their investment. If there are negative entries, they may take steps to raise your interest rate, cut your credit limit or close your account.
Debt Collection Companies
When a delinquent account is sold to a debt collection agency, the first thing they’ll do is check your credit report. They’ll be able to view your past and present accounts, employment history and personal contact information including your address, phone number and employer.
Employment Agencies and Potential Employers
You may be surprised to know that employers check your credit report when deciding whether to hire you or when considering a promotion or raise. They may be looking for signs of integrity, maturity and someone who can handle money responsibly. Your credit report will show bankruptcies, late payments, and excessive debt that may or may not prevent you from getting that job, raise or promotion.
Property Owners and Landlords
This comes a surprise to many people looking to rent or lease a new home. Landlords need to be assured that their tenants are willing and able to pay the rent each month. So their examination of your credit report will disclose trouble spots like foreclosures or evictions.
Renter’s, homeowner’s and automobile insurers will consider the information on your credit report as part of the criteria for determining if they will provide you with insurance. In addition, they will decide the rate you will pay and the amount of coverage, poor report will mean higher rates and less coverage, for example.
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