Hond Financial

Whenever you ask a lender for a loan or a line of credit, he will obtain a written credit report from one or more of the leading credit accounting authorities or agencies. The outcome of their summary report will, largely, determine whether the lender is willing to lend you the money or not. Your credit report also has major implications for those attempting to get out of credit card debt.So how does the whole process work?

If you live in the United States and have ever applied for a loan, and were approved, you have been assigned a credit rating by one or more of the many credit reporting agencies. What is a credit rating? It’s a written record of the loans that you have received along with your repayment history of those loans. Have you been late on your payments? Have you missed payments? Have you defaulted on loans? All of these acts will show up on your report.

But that’s not all. Any time that you fill in a loan application and the potential lender sends inquires of your credit worthiness to any of the credit reporting agencies, it will be recorded as an “inquiry” in their report. What you’ll find here is the name and request date of everyone who has asked to see a copy of your credit report for the last couple of years. The credit inquiry box may also show names of creditors who you have not even requested credit from, such as credit card companies who have checked your credit scores to determine if you are a prospect for one of their promotions.

You may be shocked to discover just how intrusive your credit report actually is. It will contain all kinds of extremely personal facts about you. Facts such as your social security number, your birth date, a list of your present and past employers, current and past home addresses, etc. If you have any outstanding loans, the report will also list information such as the date the loan was applied for, type of the loan, amount of the loan, history of repayment, and whether the account is still open.

If you have any loans that have been turned over to a collection agency, those loans will also be listed. If you have had any court judgments against you or property liens outstanding, those will be listed as well.

A creditor must subscribe to one of the credit bureaus for it to have access to this information. There are three major reporting agencies that lenders contact for credit information – Equifax, Experian, and Trans Union. The relationship is a two way street. These agencies provide credit worthiness information to the various lenders. The lenders, in return, provide updated customer transactional information back to the credit bureaus. So, every time you make a payment on time, or alternatively miss a payment, the lender will transmit that information to the credit bureaus.

Based on the information in your file, the credit agency will rate you and assign a score to you indicating your credit worthiness. To various degrees, many lenders will base all or part of their decision to approve the loan based on this score.

Unfortunately, because of errors in the data collection and reporting process, much of the data in your credit report is probably not correct. Many people don’t find this out until they are turned down for credit and request to see a copy of their report. Some consumers never find out. The main cause of these errors happen at the point where the data is collected. For example, if, for some reason, the creditor makes a mistake in the information that they transmit to the credit bureau, your record will have incorrect information. This is how millions of pieces of false information ends up in credit databases and the most important reason why everyone should request a copy of their credit report from each agency at least once a year.

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