subject: What Credit Report Companies Do [print this page] Credit report companies have a huge influence over a consumers' ability to transact businesses and engage in a wide array of activities. Given this, it is vital for people to know what exactly these entities do.
Basically, they keep a record of consumers' credit history--the existing debts, the amount of loans defaulted on, the amount of monthly bills being paid, and the legal cases related to financial issues filed against these consumers, if any.
These companies, which operate under the government's supervision, sell consumers' financial information to clients interested in these data. Their clients include banks, insurance firms, property owners, utility service providers, and job hunters, among others.
Based on the information they gather, these entities assign credit scores to individuals. The ratings are defined either as poor, fair, good, very good, or excellent. The grades are used as basis for decision making by the clients.
Banks take into account a person's ratings in deciding whether to approve his loan application. Insurance firms may not sell surety products to those who have a history of defaulting on loans, thinking they may not religiously pay premiums.
Owners of apartments or condominiums may refuse poorly evaluated persons to become tenants. Employers are also unlikely to hire applicants with bad financial histories, while service providers may not be willing to approve the service applications filed by persons with tainted backgrounds.
It is vital to note that credit report firms take into consideration various factors in evaluating individuals. Settlement of one's obligations is not the sole consideration of these entities when calculating the grades they assign to individuals.
The proportion of one's debts to his income is also considered in determining his ratings. Someone whose liabilities account for a huge portion of his income is likely to have a lower grade than someone whose debts only account for a small percentage of his earnings.
Promptness in the debt payment is another factor determining how firms assess people's standing. Individuals, who pay their financial obligations on time, or before due dates, are likely to enjoy better evaluations. On the other hand, people who have a tendency to settle their liabilities beyond maturity dates may be assigned lower ratings.
Companies doing evaluations, however, are not always correct in their assessment of consumers. It is possible for them to commit mistakes about certain information that may adversely affect one's image.
For instance, they may erroneously record that a person defaulted on a loan which he actually never obtained.
Given this, it is important for people to check the data assigned to them and to correct any faulty assessment.
