Good Question – What is a Credit Report?
There are many forms of credit reports. Each format contains different types of information and vary in depth and content. A merchant issuing a $300 store credit card does not need as much information as a mortgage company that is reviewing an application for $300,000.
A mortgage lender will use a tri-merged credit report, meaning the information on the report pulls from all three credit repositories (credit bureaus). Here is a sample of a tri-merged report provided by my favorite credit provider, CBCInnovis.
A credit report is a history of past credit transactions. It includes information about both open and closed accounts. The credit history is an indication of how an individual has paid their debts in the past, a good indication of how they will pay them in the future.
Mortgage credit reports are prepared in sections, each section contains different Information:
- Personal Information – Name, date of birth, social security number, current and past information about: addresses, employers, phone numbers and nicknames or aliases.
- Public Records – Usually limited to the past 7 years contains information from public government records, bankruptcies, judgments, liens and delinquent child support.
- Credit History – The main part of most reports, contains detailed information about accounts both open and closed. Names the creditor, account number, payment history, limits on the account, balances, payment amounts, etc. Goes back at least 7 years, can be as much as 11 years.
- Inquiries – All three credit bureaus keep a 2 year record of anyone that orders a credit report on an individual.
Another very important bit of information on the report is the Credit Score. This component is so important and complicated I gave it a page of its own, What is a Credit Score.
Why is the information on the credit report important? Two reasons, first it can mean the difference between a loan application being accepted or rejected, and second, it can speed up or slow down the application process.
The first reason is discussed in depth on the page What is a Credit Score.
The second reason, the speed of the application process depends on the accuracy of the information contained in the loan application. This is fairly simple, if the application says you have worked at at ABC Inc. for the past two years, the credit report says you have been employed at XYZ Inc for the last three years, and the pay stub comes from HAHA Temp Inc., that is a problem. It requires the loan officer to sort out the truth behind the discrepancies. Everything in the loan application must be accurate before the mortgage is funded by the mortgage company.