There was a time when people were blissfully unaware of the words credit report, but that would be quite dangerous in today’s day and age.
Everyone has access to credit, the average person holds up to two to three credit cards and has usually taken a home or a car loan. So most of the population makes use of credit and there are creditors out there who cater to these demands. The usual creditors are the banks and loan agencies.
Why Purpose Do Credit Reports Serve?
In simple terms a credit report provides your credit history and your payment history. It is just a statement of all your dealings in credit. The number of credit cards you hold, your total credits in terms of personal loans, home loans, insurance and other credits are mentioned in the report.
So this report consolidates your entire credit history. When you approach a lender for credit he would check your credit report to ascertain the risk he is taking in providing you credit. If your credit reports shows that you have been duly making credit payments on time and that you don’t have many loans, the lender will find you to be a low risk customer and would be willing to lend you credit.
Your credit report can also influence the rate of interest at which the lender gives a loan. If you have had a bad credit history it would intake that you are in a high risk zone and hence the rate of interest would also be high.
There is also a trend now for the employers to check the credit report of the employee they plan to hire. If they find you defaulting on payments or if you have a low credit score they might think twice about hiring you.
Credit score is a three digit number which is derived by performing a particular calculation on your credit report. The lower your credit score, the higher the risk for the lender, making it difficult for you to get any further credit or loans.
Why Should Your Monitor Your Credit Reports Frequently?
There are a lot of frauds happening with respect to credit cards. If someone illegally uses your credit card, or if the bank makes a mistake in processing your payments there is a possibility for you to default on your credit without your knowledge.
Under these circumstances it is important to monitor your credit report at least once a month to be on the safer side. Checking it annually is not a safe option anymore. Finding an ambiguity in your credit report can quickly alert you to rectify the same. You can check your credit reports free of cost at
annualcreditreport.com or from a site like
bestcreditreports.com in case you have used up your 1 free credit report for the year.
About the Author:
Article by Gerald Peters
