Databases in which personal information is collected, a catalog of issued and repaid credits, limits of credit cards and delayed payments are the starting point for arriving at a decision by banks and financial institutions about financing of future purchases and projects of each customer. Any cloud on the reputation, such as the recent insolvency or financial difficulties, may limit the possibility of credit purchase and will force up rates on credits. The same may happen after applying for several credit cards at the same time, even if it is done in order to match the terms proposed by some few banks.
Data are collected by accounting agencies about clients, often called “credit bureaus”. For the first time they appeared in the U.S. in the second half of the XIX century and became widely distributed all over the world little by little.
In the U.S. three companies – Equifax, Experian and TransUnion – almost have control over the market. Their databases contain information about 1.5 billion dollars on the accounts of 190 million citizens. Since 2001 every American can appeal to them in order to obtain a detailed report about his solvency for a small fee. Every agency also calculates the person’s score. Depending on its level the interests on credit cards can be above or below several percents. Credit report plays such an important role in the life of any individual that consultancy about its betterment became a profitable business.
The secret of a good credit report is in a decent income, timely payments, underutilization of credit limits, and, oddly enough, the presence of debts. The absence of the credit report keeps people from getting loans for apartments and cards, whatever their salary is.
Theoretically, personal data is preserved by law and when filling out an application for a credit or a credit card the client must entitle the bank or finance organization to collect data about him. If you are not confident in the financiers, you may refuse to do it. But in this case you have to apply somewhere else to get the loan.
Information about you is preserved in databases for years. In the U.S. an application for opening a new credit account stays in the system for two years, and information about loans and insolvency- for seven years.
Many people managed to take a loan for a house or a car, or anything else in those good times. And now they have to pay a definite amount of money each month. To be sure that everything is ok with your loan, use credit report monitoring. Of course, in most cases the things go well but don’t ignore credit monitoring – this is your financial safety.