A credit report is the most essential aspect which helps the loan providers and financial institution to determine the financial background of the borrower. This report is a prerequisite to check the borrower’s details before offering a debt. The loan providers check various things before approving the fund amount.
What is a credit report?
A credit report is a summary of how you have handled all your financial accounts. It takes into accounts all your credit cards and bank accounts. Credit reports are used by the loan providers to decide whether you are eligible to offer a loan or not. It has all the details of how responsibly have you handled credit and your past debt transactions.
A credit report includes all the personal information like name, address, age, and date of birth. These are just identifying information and have nothing to do with credit scores. It also includes the credit account information which states loans, credit cards, bank accounts, credit limit, payment history, and account balance.
How is the credit report calculated?
The credit report is calculated taking into account several factors. The entire report contains various factors of your financial journey which gives you a credit score and a detailed statement of the finance. The factors are determined on basis of their importance and a percentage is allotted to each according to its priority in deciding the score. These are the factors which help in calculating the credit history.
Must Read : How to calculate home loan emi
Factors affecting credit History
- Accounts owned: This includes all the bank accounts owned by you. It takes into account all the bank accounts of different banks in your identity. It is a very important factor that determines the bank accounts.
- Payment history: It involves the history of all your financial transactions. It involves all your payment details regarding your credit cards, bank accounts, and loan repayment. In payment history, there is a detailed history of all the transactions that you have done in the past.
- Length of credit: in the length of credit it includes all the credit cards and bank accounts. It is recommended to not block the accounts and credit cards that you no longer use. This will increase your credit length and give a good credit score.
Summing up
A Credit Report will help you attain a good credit score and offers help to the loan providers in summarizing your financial history. Maintain good credit habits to have a positive credit report.