So, you’re applying for a loan - or you’re the one trying to qualify a customer for a loan. Either way, the time is going to come in this process when a credit report is needed, and it will be important for you to know what information you’ll find here.
Credit reports are important records of consumers’ credit histories that lenders use to determine whether or not a person is qualified to take a loan from them. A credit report tells the lender how likely the borrower will be to pay back the loan.
Let’s take a look at what information the credit report will tell us.
There are five main categories of information that you’ll find on any credit report no matter which credit bureau (Experian, EquiFax, or TransUnion) it comes from:
- Personally Identifiable Information
- Credit Accounts
- Credit Score
- Public Records and Collections
- Credit Inquiries
We’ll break down each of these sections so you know exactly what you’ll find in any given credit report.
Personally Identifiable Information (PII)
A consumer’s personal information is what displays first on the report. This section of the credit report includes information like the consumer’s name, birthdate, social security number, phone number, up to three addresses, and employment history.
Typically, the most recent address will display first below the other personal information, and then the other addresses will follow.
This information is what is used to start the credit report process and is only given once the consumer inquires about a loan - for example, when someone goes into a car dealership to take out a loan on a new car. The dealer takes their personal information to start the loan qualification process.
This next section of the report shows the consumer’s full credit history. The report lists every lender and account of credit that the consumer has taken out with them, as well as date the account was opened, the balance remaining on each account, payment history, and if payments have been made on time. Any loans that you’ve taken out with an official creditor will show on this report.
Some credit bureaus report different information from others, so this information may vary depending on the bureau that is being used.
Other than the actual score, this section will be the most telling to creditors as they determine whether or not a customer is qualified to take out a loan.
The next section - the moment you’ve all been waiting for - is the credit score. Determined primarily by your credit history, this score will help creditors prequalify customers for specific loans.
Credit scores typically range from 400 - 850, with 400 being very poor credit and 850 being fantastic credit. Here’s how creditors look at these scores:
- A generally accepted score for home rentals, bank loans, and car loans is 625 or higher.
- Scores over 800 are very, very rare, and consumers with these scores will qualify for the best interest rates and special programs.
- Scores over 700 are really good. Most consumers with this score qualify for special programs and interest rates.
- Scores between 600 and 700 are the most common and are still considered good. Sometimes a consumer may be required to provide extra documentation to be accepted for a loan.
- Scores lower than 600 are considered risky. Consumers with these scores typically have much higher interest rates if they are approved for a loan, and they typically have to provide more documentation than those with higher scores to prove they will be reliable to lend to.
- If there is no score, it’s simply because the consumer has no credit history and that no one has done a pull for their credit history before. If the “On File Since” date is the same day as the inquiry for a loan, that is a good indicator that no one has run a credit check before. This doesn’t mean the consumer won’t qualify for a loan, but they will have a provide a lot more documentation to prove their reliability to pay the loan back.
Public Records and Collections
This section of the credit report is where any information from state and county court records is kept - like filing for bankruptcy, liens, civil actions against you, and foreclosures. Any debt that has been sent to collections for not being paid is also displayed here. Collections information generally includes information like the original creditor, collections company, balanced owed, and status of the collection.
When someone applies for a loan, they have to authorize creditors to receive a copy of their individual credit report.
This section shows any companies that have done credit checks on the consumer within the past two years. It generally shows the date of the credit check and the company the did the credit pull. Each hard inquiry lowers a credit score by about 2 points.
As a consumer, it’s important for you to be familiar with your own credit score and history so you aren’t surprised when a decision is made about a loan you apply for. And lenders, you should be aware of all of this information so that you can make the best decisions about who to give loans to.
For more information about how to prequalify your customers for a new loan, give Soft Pull Solutions a call today.