by Donna Burt

Created on: September 28, 2008   Last Updated: November 08, 2008

In an ever changing economy, credit reports have reached a forefront for ways to save money and/or obtain employment. While most are aware that a credit report is used as a tool to loan money or obtain a place to live, many may not be aware that numerous employers have began using credit reports in their hiring practice. For these reasons, understanding what a credit report is should propel its importance as a top priority.

The credit report itself not only provides information about who has loaned someone money and how these debts have been paid. In addition, it also reflects other important information such as residence and job information as well as public records such as court ordered judgments, child support payments and bankruptcy. With such critical information, it is extremely important to make sure the information being reported is accurate.

While the breakdown of a credit report summarizes residence and job history, it also lists any creditor that has a reporting policy along with the amount of credit they approved (credit limit), the current balance and payment, when it was opened and how it was paid in 30, 60 and 90 day increments. It will also reflect when that account was last used. This information is used to issue points which result in an overall score commonly referred to as a credit score. This score is usually the driving force behind the issuance of credit. The lower the credit score, the higher the risk.

As credit woes lead the headlines, more and more creditors (those providing money or services) are relying on the credit report to not only determine if the person applying is a good credit risk, but have also begun to use it as a basis for what they charge when doing so. The end result of a higher credit score means the possibility of a lower interest rate or lesser security deposit.

In the realm of the employment world, more and more employers are using credit reports as part of their hiring practice. With the overall thought that a credit report reflects how responsible a person is, employers are relating this to possible job performance. When faced with the decision of two equal candidates, some employers will consider information obtained from a credit report as the determining factor in their decision on who to hire.

While everyone should review a copy of their credit report for information that is not valid, another reason to view their report is identity theft. With the growth of the internet, identity theft has grown at an alarming rate. A simple review of a credit report allows a victim to the possible resolution or elimination of an otherwise devastating situation.

As a consumer, you are entitled to a free report each year or if you are denied credit for any reason. To order a free report is easy, and can be done over the internet. The three major agencies are Experian, Equifax and Transunion. While the official on-line website www.annualcreditreport.com allows you to order all three reports free of charge, it is also a portal of information to include frequently asked questions and a section for fraud alert.

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