At NebraskaLand Bank, we believe that understanding your credit report is a vital step in managing your financial health and making informed decisions. Whether you're planning to apply for a home loan or other large purchases, your credit report plays a crucial role in determining your creditworthiness.
What is a Credit Report?
A credit report is a detailed record of your credit history, compiled by credit reporting agencies. This report is essential for lenders, employers, landlords, and insurers to assess your ability to manage finances and predict your likelihood of repaying debts on time.
Who Creates Your Credit Report?
Credit reports are generated by credit reporting agencies, also known as credit bureaus. The three major agencies—Experian, Equifax, and TransUnion—collect information from various creditors and public records to compile your report.
What’s Included in Your Credit Report?
Your credit report is organized into four main sections:
Identifying Information: This includes your name, address history, Social Security number, birth year, employment history, and spouse's name if applicable.
Public Record Information: This section covers court records related to bankruptcies, tax liens, and monetary judgments. In some states, overdue child support payments may also be listed.
Credit Information: Here, you'll find details about your credit accounts, including the type of loan, account opening dates, credit limits, balances, and payment history over the past two years. It may also reflect whether you pay off revolving credit lines monthly or carry a balance.
Inquiries: This lists all parties who have accessed your credit report in the last two years, divided into soft inquiries (non-impactful, such as your own checks or pre-approved offers) and hard inquiries (which may affect your credit score).
What’s Not on a Credit Report?
Your report does not include personal details such as race, religion, medical history, lifestyle, political preferences, or bank account balances.
Duration of Negative Information
Negative items like missed payments and public records can remain on your report for seven years, while bankruptcies can stay for ten years. Recently added negative items have a more significant impact on your credit score.
Credit Report vs. Credit Score
Your credit score, a three-digit number derived from your credit report data, helps lenders quickly evaluate your credit risk. This score, is designed to predict how likely you are to repay borrowed money. Your credit score doesn’t tell a lender everything. Credit reports contain your credit history, which is a record of how you’ve managed debt payment over a period of time.
What Lenders Look For in a Credit Report
"Credit reports give lenders insight into a borrower's financial history, helping them make informed lending choices." -Tonya Duncan Senior VP Mortgage Lending Manager. Some red flags that we notice are listed below.
- Delinquent accounts, meaning those paid more than 30 days late
- Unpaid collection accounts
- Number of recent credit inquiries
- Outstanding debts
- A past bankruptcy
- Foreclosures
Healthy Credit Report Habits
Annual Reviews: Regularly check your credit reports for accuracy. You're entitled to free annual reports from each agency at AnnualCreditReport.com.
Correcting Errors: If you find mistakes, contact the credit provider or dispute the error online with the credit reporting agencies.
Preparation for Home Buying: Review your report early in the homebuying process to ensure all information is current and accurate.
For personalized advice on how your credit report can affect your ability to secure a mortgage, our team at NebraskaLand Bank is here to help. Visit us to explore more about how maintaining a healthy credit report can pave the way for your financial future.