Giving Credit Where Credit is Due

During the loan approval process, a question that customers often raise is, “What do they look for on my credit report?” and “What is a credit report, anyway?”

Credit reports are used by the majority of potential lenders to assess your credit worthiness and help determine whether or not to approve your loan. A credit report documents your financial history for the previous seven years and contains personal information such as your name, address and social security number, as well as information about your credit card use and payment history, mortgage payment history and installment loan payment history. The report also contains your employment information to give reviewers a sense of your ability to make future payments. There is one exception to the seven-year rule; if you declare bankruptcy, this will remain on your report for 10 years.

Your credit report may also contain your credit score — a number between 300 and 850 — that is used to predict whether you will repay a loan. Your credit score is based on your payment history, the total amount you owe, the length of your credit history, any newly acquired credit and the type of credit you are using. Many lenders use this number to determine whether or not to approve your loan.

Oftentimes, this number also correlates with the interest rate on your loan; a higher credit score will often be granted a lower interest rate on the loan. A lot of valuable information is contained on your credit report, and lenders rely heavily on this tool. As a customer, you, too, should give your credit report the attention it deserves — after all, it can affect your ability to build the life you desire.

Effective September 1, 2005, all consumers in the United States are entitled to one free credit report every year from
each of the three major credit reporting companies — Equifax, Experian and TransUnion. For more information on ordering your free credit reports, visit

Written by Andrea Walton, a State Farm agent based in Red Oak.