What’s Inside a Credit Report – See What Creditors Know

A credit report is compiled of information on your place of residence, financial track record in regards to paying bills, loans you’ve received recently, and judgments or bankruptcies. Its primary purpose is to aid creditors in determining whether you’re a responsible person to lend to and, if so, how much money they can reasonably trust you to pay back.

Sometimes a credit report also plays a role in the hiring process, so having a number of negative items on it can even result in being turned down for a job.

Here’s What Others Can See in Your Credit Report

Personal Identification Information

Credit reporting companies collect personal identity information, including your home address, phone number, and birth date.

At first glance, this information may not seem useful. However, even a home address has value when creditors can look up the cost of living and property values in that area. From here, it’s possible to deduce the level of income one must maintain to live there.

Such information is also useful in preventing credit fraud. The credit reporting agencies keep track of past addresses as well, based on the details provided in a credit application. If a previous or current address is wrong or unknown, you may need to take a closer look at why that is the case.

Negative Credit Report Items

All negative items sent to credit reporting agencies are added to your credit report. Late bills are usually reported after 30 days of nonpayment. However, this is not the case for all late bills. For instance, medical debt may not show up on your credit report until it is severely past due.

Other negative items will show up rather quickly, including court judgments against you, liens, and bankruptcy. Bankruptcies are major red flags for creditors, as are court judgments and liens. They may highlight financial trouble in the past.

In general, the seriousness of the negative item determines its likelihood to be reported sooner or later. However, negative items stay on your credit report for several years, making it more challenging to get affordable credit in the future.

Positive Credit Report Items

Fortunately for consumers, positive credit items are numerous, and some negative items can turn into positives. For example, applying for a new credit line is seen as negative at first. However, if the application is approved, the amount of new credit has the potential to bolster your credit score.

Even if it negatively affects your score initially, an older line of credit looks more positive than a new one. The longer you have a line of credit, while also making all of your payments on time, the higher your score will be.

Other positives are paying bills on time, having a variety of different kinds of credit (a mortgage loan and credit card, for example), and having successfully paid off loans in the past. Since the exact algorithm is a secret, some positives are likely unknown. Age, gender, and place of employment may factor into the equation, but it’s impossible to say.

Final Thoughts on What Creditors See Inside Consumer Credit Reports

Though all of this seems relatively simple, millions of dollars and decades of effort have gone into perfecting the algorithms to vet consumers. Assigning points to each consumer for positive items and taking them away for negative ones is surprisingly effective.

It’s not perfect, of course; young people generally have no credit at all, so their credit history report and score maybe non-existent or new. Because of this, they’re not viewed as trustworthy, but this isn’t necessarily true.

The same can be said about an individual who has had credit issues in the past. They could be in a better situation now and have changed their financial ways to be a responsible borrower, but having a spotted credit report may make it hard to see from a creditor perspective.

Overall, it is important to understand what is in your credit report so you can learn how to improve your credit score if needed. Be sure to check in on your credit reports from the three major credit reporting agencies – Equifax, Experian, and Transunion, at least once per year, to ensure what you see is accurate in terms of your personal information and positive or negative entries.