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Just How Many Types of Credit Reports Are There?

Just How Many Types of Credit Reports Are There?

This can be a bit of a surprise for you but there are actually more than one type of credit report in the market right now. This could mean a lot of things. However, the most important would be that you can get a totally different credit score depending on what type of credit report you avail of.

Since it’s better that you know how each agency treats your credit data, it would be best to understand how credit reports are made and what makes them different from each other. Of course, this will require for you to understand a few basic concepts first.

The Basics of a Credit Report

What’s the deal with credit reports? What should you know about them to use them to your advantage? Here are several basic information for credit reports that you need to be aware of.

1. The Rule of Three

For some reason, every country out there across the world always seem to have three credit reporting agencies operating in it. As for the UK, the three credit reporting agencies are Experian, TransUnion, and Equifax. These agencies gather personal information about credit holders to assist creditors with their operations.

This also means that each credit reporting agency has their own way of interpreting data gathered from you when preparing your report. For instance, you might get a decent grade in Equifax but a lower one in TransUnion since the latter took into consideration several factors that the former didn’t.

Also, creditors can pick and choose which agency should they report your transactions with them to. As such, information in the report of one agency might not appear in another.

2. They’re Actually Quite Simple to Follow

One look at a credit report and you might think that you are looking at an engineering student’s term paper. The truth, however, is that credit reports could not get any simpler than they are despite their intimidating layout.

A credit report does though contain some important data. This will include your payment history, your credit utilisation ratio, the number of outstanding balances you have still to pay, and any derogatory remark creditors made regarding any transaction you made with them.

At best, a credit report should be laid out in a manner that anyone reading it can quickly find the data that they need. Some reporting agencies also provide assistance in helping credit holders understand their report better and even give them tips on how to improve on their performance for the next report.

3. Data Won’t Stay Forever

If you worry about negative entries to your report staying in your record, don’t. credit agencies are required under law to keep derogatory remarks to your account stay on record for no more than 6 years. This means that any late payment, any default, and any instance where you bailed out on a creditor disappear from your record before a decade ends.

Of course, this does not mean that your obligation to your debts disappear as well. You are still going to pay for those to the creditor you owe them to. What it means, however, is that your negative entries won’t forever impact your credit score within a few years.

4. They are Given Out Several Times a Year

Credit reports are prepared and submitted for more than once a year. Depending on the type of credit report, one report can be submitted on a quarterly basis or on request.

The point is that you should expect to get more than 1 credit report per year. After all, a lot could happen in a year which is why it makes better sense that your credit score should reflect your activities within a span of months.

Also, the way you receive them differs from agency to agency. Some agencies are adamant on sending you your report the usual way I.e. through mail. Others, however, allow you to view your reports online. This also depends on the type of credit report you are requesting.

5. They are Far From Being Indisputable

Perhaps the most important thing you have to keep in mind with credit reports is that they are made by humans. And humans, of course, tend to make mistakes. When preparing your credit report, an agent might allocate transactions made by another person to your account or mark settled debts as outstanding. The inclusion of these errors would ultimately affect your score negatively.

This is why credit holders have every right to dispute the report by informing the agency of the mistake and demanding a correction. They might even take the case to an arbiter or the proper courts so that the agency will be compelled to amend the report provided, of course, that the court rules in favour of the credit holder.

The point is that mistakes can be made on a credit report. It’s your duty as a credit holder to scrutinise your report intently and notify the agency of such as soon as possible.

Now that we got that out of the way, let’s proceed to the types of credit report made available to you.

Credit Report Types

Now, you have to keep in mind that every credit reporting agency has their own methodology when preparing your report. This is why one credit report will be different from another depending on which agency made them.

As such, credit reports will not be categorised by only the type of data they contain but also the method of which you can avail of them. As of now, there are three official types of credit report which include:

1. The Monthly Report

This is your standard report given to you by the agency of your choice as part of their subscribable service package. The release of these reports will be after every billing period which means that the data there will reflect your most recent credit activities.

However, there are some agencies that send you a report once every financial quarter. There are some credit holders whose performances do not fluctuate as much on a monthly basis. As such, if your score tends to maintain a steady trend for months on end because your credit activities are that minimal, it’s best to opt for quarterly report services.

2. The Statutory Credit Report

Have you ever wondered what creditors are asking from credit reporting agencies when they request for your information? This type of credit report might just be your option. Available upon request, a statutory credit report will contain every bit of information that lenders will ask from the agency about you.

Here’s the drawback, though: You have to pay £2.00 for the report every request. After all, it takes a while to process your request and that requires extra effort from the agency. Also, the report itself is quite comprehensive to the point of information overload.

To make the most out of a statutory credit report, you have to determine first what you are looking for in that report. This way, you don’t waste a lot of time just figuring out what the report is trying to say. Also, expect that the SCR will not contain a credit score.

Lastly, keep in mind that a statutory credit report does not contain a lot of the perks that monthly reporting services off such as alerts to potential fraud on your account as well as identity theft attempts. It’s basically one huge information dump of your activities as a credit holder up to that point and nothing more.

3. The Multi-Agency Report

Before we proceed, it’s time that we talk about something called a credit file. Basically, every agency has a credit file for each credit holder which might be different from one company to another. For instance, Equifax’s credit file on you will contain some entries not found on TransUnion’s file or the latter has some files that Experian doesn’t.

The point is that these agencies have different credit files for the same person which leads to different credit scores. However, that can be solved with a Multi-Agency report.

Prepared by third party companies like CheckMyFile.com, a multi-agency report draws from the credit files that each agency has over you in order to deliver a more comprehensive report.

However, as comprehensive as this report might be, there is no assurance that it will be free from errors. The 3rd party service will just take into consideration every piece of data they get. They may not verify the files as that takes too much effort.

Also, you still have to pay for the services like the monthly reports that your agency provides you with. This means that you will be paying extra for a report that may or may not say the same things that you already know regarding your current credit situation.

But What About Free Credit Reports?

There has been talk about free credit reports being their own category. The truth, however, is there is no such thing as a “free credit report”. The free reports that your agency gives you once you subscribe to them? That’s part of the introductory period which means you’ll eventually pay for your credit report once a considerable period of time has passed. The introductory period for reporting agencies can range from 6 months to a full year.

And what about the free credit report you are entitled to as mandated by the law? Surely that means that free credit reports exist, right? The truth is that the law only requires CRAs to furnish you the same report that is a snapshot at that time.

Simply put, it’s the same report as any of the three listed above minus the price tag. As far as any distinction is concerned, free credit reports do not stand on their own classification.

Taking Advantage of Your Credit Reports

Since every credit report has their own purpose and advantages, there is no point in debating which credit report is the best. As a credit holder, however, it’s your responsibility to check on your credit at least once a year. Aside from this, there are several instances where you should check on your credit.

1. You Are About to Make a Huge Purchase

Supposed that you are about to purchase a new house, a car, a boat, or start a new business. For this, you would require a loan which prompts that creditor to check on your credit history.

You might be surprised at how the seemingly insignificant transactions you defaulted a few years ago would cause your application to be denied. A book you never bothered to return to the local library 20 years ago, a parking ticket you never paid, or even a gym membership you forgot to cancel after New Year’s Day can affect your application negatively.

This is why it is best that you check on your credit history 3 months before you make a huge purchase. This should give you enough time to settle your debts with your past creditors.

2. Your Credit Application Just Got Rejected

Whenever your application for a loan or credit just got rejected, you are entitled under law to request for a credit report for free. The reason for this is simple: that creditor rejected your application because they found something odd in your credit history. As such, it is your right to know for what reason were you rejected.

Once you get your copy, you need to check where you failed and make sure that the rejection was based on accurate data. If you find errors in your report, you can always dispute it and ask for a correction.

There is also nothing in the law that says you can’t resubmit your application to the same creditor once changes to your credit report are done. You only just need to notify where you are re-applying and state that changes have been made to the credit history. Who knows, you might get approved this time.

3. You’ve Recently Find Out You are a Victim of Identity Theft

Supposed that you look at your bank statements and find out that you are hemorrhaging money fast. You can always request a credit report to determine whether or not you’ve been a victim of identity theft. The law also compels for agencies to give you this credit report for free due to fact that this is an emergency.

Once you have your report, check for any transaction that are seemingly out of your usual spending pattern. The report would be detailed enough to tell you where and when this transaction occurred.

If you don’t remember making that transaction, you can always notify the creditor and agency so it won’t be included in the next report. You need to do this ASAP as any unauthorised transaction would still be recorded in your account until you notify them of the of the incident.

4. You are Planning to Settle Your Debts

Perhaps you’ve wised up and decided that now is the right time to settle all of your debts. The problem is that you can no longer remember all of your debts and when you’ve made them. A credit report can help you remember all your debts and prepare for a debt management strategy.

A major portion of your credit report will be dedicated to your outstanding balances and history of debts. Here, you will get a good idea as to who you owed money to and how much. Once you know the full extent of your financial obligations, all that is left is to settle them in your own pace.

Some credit reporting agencies also offer assistance to credit holders in handling their debts. This includes planning which debts to settle first and how to save up on money. In time, you’d have taken out a major portion of your list of debts and eventually clear it. Of course, having little to no debts tend to improve your credit score once the next report is going to be published.

In Conclusion

It goes without saying that a credit report can help you improve on your financial situation regardless of what type it is. However, each type you avail of will have its own set of functions and advantages as well as some drawbacks. I

If you really want to have a comprehensive look at your finances, it is best to draw from multiple sources. Aside from that, you need to really understand what each report is telling you. The better you know of your current financial situation, the more efficient you can be in handling your own credit; especially the debts that you incur along the way.

What other features do you know of that make each credit report unique? Which credit reporting agency do you think prepares the most comprehensive reports? Your opinions are always welcome in the comments section down below.

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