Financial Education



Credit Reporting

Credit reporting is your history of repaying debts on time. When you apply for a credit card, personal loan, or any other type of credit, the lender must decide if you are a good credit risk. Lenders do this by checking your credit report to see how you have paid debts in the past. A poor repayment history will hurt your cause.

In the end, you are responsible for your own credit standing—you can make smart choices or unwise ones. But there are tools available to help you manage and protect your credit standing.

How Your Credit File Is Created and Used

When you get a credit card or take out a loan, the person or company granting you that service reports the information on what you borrowed and how you paid back the loan to credit reporting agencies. Credit reporting agencies consolidate all the information they receive about you into a file, called your credit file.

When another lender or service provider considers you for a loan or service, they contact the credit reporting agency to request your credit report. The lender then uses the information in your credit report to decide whether to offer you their service and at what rate or fee.

When you open an account with the lender, the lender then reports back to the credit reporting agencies about your payment record and this information becomes another part of your credit file.

This whole system allows you to get and use credit easily and efficiently. It also allows lenders to quickly get information to make decisions about you.

Lenders Use Your Credit Report to Evaluate You

Although credit reporting agencies maintain the information in your credit file, it is important to note that the credit reporting agency does not know how the information a lender sees will affect any particular lending decision. In addition, different lenders have different methods and formulas for deciding whether to grant you credit.