A credit report is a factual record of your credit payment history. It's provided to companies and individuals by credit bureaus for purposes permitted by law, usually to grant you credit. The main purpose of a credit report is to help a credit grantor decide whether to grant you credit based upon your credit payment history. A credit report is a report generated from your credit file (a database maintained by a credit bureau containing your credit history).
More than 205 million people in the United States have a credit card, car loan, mortgage or student loan. Almost every one of them has a credit file. The information in your credit file is obtained directly from the companies you have credit with, as well as from government agencies such as the legal court systems.
When you apply for any type of credit or financing, a credit report is generally obtained which contains information from at least one of the three major credit bureaus (Experian - formerly TRW, Equifax and Trans Union). However, these are not the only credit bureaus. There are hundreds of smaller credit bureaus around the country, but most credit grantors will look at information from one of the "Big Three."
There are different types of credit reports available:
- Consumer Credit Reports
- Property Manager Credit Reports:
These reports are basically identical to a typical consumer credit report.
- Business Credit Reports
Used to determine a business's credit worthiness, these reports typically include information on the primary business function and SIC code; company background information including company statistics such as years in business, number of employees, estimated sales, principal(s) and their titles; typical consumer-report-type information such as inquiries, accounts and status, public records. Sometimes includes payment trends of other companies by SIC group, showing how a company compares to the industry average.
- Employer Credit Reports
In addition to the information typically contained in a consumer credit report, it may include current and previous employment verification; education verification; address verification; Department of Motor Vehicles record check; and criminal records check.
- Mortgage Broker Credit Reports
These special reports must meet or exceed all standards established by HUD, FHA, VA, FMHA, FNHA, FNMA and FHLMC. Contains consumer credit information nationwide merged from at least two national credit repositories, and includes manually verified name, address and employment history when available, plus public record, trade lines and inquiry information. Risk scoring models from the national bureaus can also be included.
A credit bureau collects and maintains information on the majority of Americans, but they are not affiliated with the government in any way. You have some rights and protection through the Fair Credit Reporting Act (FCRA). The credit bureaus are for-profit corporations and they sell your personal information for money.
The credit bureaus make money by gathering your credit information from credit grantors, listing the information in your credit file, selling it to other credit grantors who want to see your credit history before they decide to lend you money. If you have shown any tendency to pay late or to default on paying your financial commitments, many credit grantors' computers are programmed to immediately reject your application.
Credit bureaus get your personal information from the same lenders who grant you credit through agreements they have made that require the credit grantor to inform the credit bureau of everything that occurs in your relationship with the credit grantor.
For example, if you are late with a payment, this fact is quickly reported to at least one of the major credit bureaus and is added to your credit history. Credit reports not only show how you are currently managing your credit, they are also histories of everything you have done in the past as far as your credit is concerned.