What Companies and Institutions Look For
Companies submit an inquiry for credit reports for different reasons, and they review the report for those reasons. It can help a person to be prepared to deal with these companies if they know what to expect.
Employers have several reasons to view a credit report. If the employee will be in a high level position or have access to money or accounting books, they may be concerned about the risk for fraud or embezzlement. Hiring managers may look at the level of debt and payments to help determine if the candidate will be distracted by personal issues and detract from their job performance.Credit reports can also be used to verify information on a resume or application. They may replace or confirm character references.
Other companies look at your credit report to ascertain the likelihood of repayment of a loan or credit card. A record of timely payments indicates a safe level of risk for the company. Insurance companies look for indications that the person might commit insurance fraud for needed funds.
A credit score is a three number indicator of your credit report. A quick check of a person's score can tell the company a lot about the information that the report contains. There are generally six categories that credit scores are divided into; each one tells the company important information based on general statistics.
Excellent Credit (above 800)
These people are every company's favorite. They pay bills on time, have a long credit history with no blemishes, and have no negative information anywhere on their account. They post the lowest risk to lenders and credit companies. The person will have experience with both revolving and installment credit with a stable work history, often having one job in their employment history. They qualify for the best rates and benefits.
Very Good Credit (between 750 and 800)
This person will enjoy most of the same benefits as those in the excellent category. They will have the same record, with possibly a higher debt-to-income ratio.
Good Credit (between 700 and 750)
A person in this category also has a good repayment history. They may have a late payment or collections account somewhere in their past, but have taken care of it. They may have a higher balance on their credit cards, but they are working on paying it down. This person will have no problem getting credit or an insurance policy, but they may pay slightly higher rates than people with better credit scores.
Fair Credit (650-700)
People with fair credit scores have some negative information in their report or they may carry a high balance with their credit. There may be several late payments and some collection accounts in the past. These lenders will find it more difficult to find financing because they are seen as higher risk. They may be required to have collateral or a co-signer on a loan, and they may have higher rates for loans and credit they do receive.
Bad Credit (600-650)
This is a high risk category and lenders will not extend credit unless there is a large down payment or collateral for loans. Interest rates for loans and insurance rates will be much higher. The person with bad credit has had multiple late payments, more than one account in collections, and possibly even a bankruptcy or judgment against them.
Very Bad Credit (below 600)
Getting a loan will be impossible for people in this category, except with lenders who specialize in bad credit. Interest rates for personal loans for people with bad credit will be astronomical. People who have a score in this range have numerous late payments, open collections, and delinquencies and probably a judgment to two against them. Credit is maxed out and may be suspended due to nonpayment. Jobs may also be limited for people with very bad credit.
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