Understanding a Consumer Credit Report

It may come as a surprise to learn that an estimated 45 million Americans don’t have a credit score. That figure would suggest that the consumer credit report isn’t a priority. Far from it. Establishing a credit history is an important step in unlocking the financing that accompanies many of life’s key stages, from buying a car to owning a house. To obtain a credit score, you will first need a consumer credit report. Find out what it covers, where to get one, and why it matters. 

What Is Consumer Credit Information?

A consumer credit report is a statement of your previous borrowing activity and your current credit situation. It tells lenders how much credit you are currently utilizing, how often you make repayments on time, and helps them evaluate whether you represent a prudent risk as a borrower. The consumer report itself is neutral, but it forms the basis of the credit score, which lenders will use to approve or reject an application. All credit reports and scoring are regulated by the Fair Credit Reporting Act (FCRA). 

How Do I Get a Credit Report?

You are entitled to one free credit report every 12 months from each of the three main credit reporting bureaus. Since there is usually only minor variation between the three bureaus, there is little to be gained by requesting all at once (or view your 3B credit report). Instead, it’s a good idea to request one every four months, for example, to monitor the change in your score over a longer period. To get your report, go to AnnualCreditReport.com. Bear in mind, however, that these free reports will not include a credit score. 

Does Pulling a Consumer Report Hurt my Credit?

It’s a common misconception that requesting your own credit report will impact your score. That is not the case, however. Indeed, one of the most important factors in achieving your best possible credit score is to stay on top of the numbers, check for accuracy and look for opportunities to eliminate bad credit. Since checking your own credit report is not a request for a new credit line, there is no impact on your credit score. If you were to apply for a new loan, however, you would see a change in your score —  usually in the form of a temporary dip. 

Why Do I Need a Consumer Credit Report? 

For most of us, the credit report achieves the greatest significance when we reach the point in our lives when we’re making major purchases that require borrowing. Typically, that includes securing a car loan or mortgage, but it could be a variety of other financial steps, from insurance to utilities. At that moment, lenders require a credit report to evaluate the risk (or lack of) that we pose as borrowers. 

Bearing in mind that a lender can obtain your credit report and make a decision without your involvement, there are some compelling reasons to obtain your own credit report first. For a start, you need to know what they’re seeing. Secondly, there may be errors in your report that you will want to correct. Thirdly, even if you have no intention of applying for a loan, your credit report offers an early warning that you may be the victim of identity theft. 

Taking a proactive approach to your own consumer credit report is the most reliable strategy for achieving your best possible credit score and addressing any errors or inaccuracies early (not to mention identity theft). Don’t wait until you are ready to apply for a loan to discover your report for the first time. With ScoreMaster’s suite of intuitive tools, you can take your credit report in hand and use it to unlock the opportunities you dream of. 

Sources:

Congressional Research Service – Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues

Consumer Finance – What is a credit report?.

Investopedia – Business Credit Reports vs. Consumer Credit Reports: What’s the Difference?

Categorised in: Borrowing Tips

This post was written by David B. Coulter