While considering whether or not to extend credit to a borrower and on what terms, lenders rely on credit reports to gauge the creditworthiness of the borrower. Credit reports are of great value for both individuals and organizations, as they have data gathered from various lenders and billing entities. In addition to showing how creditworthy a person or a company is, the reports demonstrate lots of other qualities about the borrower, for example their reliability and honesty as well as sense of prioritization. The reports can also indicate the management ability of a person or an organization.
Below are some ways in which credit reports can be put to use to evaluate people:
For creditors to evaluate your creditworthiness
Are you planning on getting a credit card? Your credit card provider will use your credit report to determine your creditworthiness. The card companies are interested in knowing if you have other cards and how well you pay your obligations. Of course, if you have other cards, it means you will be more strained to pay for the new card balances, depending on your income. Also, the card provider will see how well you pay your cards. All this information is necessary to execute their services smoothly and to minimize their risks.
Additionally, banks use your credit report before approving your loan applications. In the same way as credit card providers, they want to know if you have other outstanding loans, your repayment patterns, and so on. Should you have a bad credit history, they may consider turning down your application or charging you higher interest rates. However, a bad credit history and score does not mean you cannot get credit, since you can work with experts like Boostcredit101 to help you improve your rating. You may also adopt other strategies, like disputing issues in your report, to repair the bad credit score.
For utility companies to evaluate your ability to pay bills
Utility companies, like water and telephone companies, use your credit report to determine your ability to pay your bills. The companies may decide to demand a higher deposit from you if they consider you to be a risky client based on your poor payment history.
For employers to gauge your financial management
Although employers get only limited information from your credit report, they are interested in how you deal with your bills for their own reasons. Surprisingly, some potential employers may consider your credit score and history before recruiting you, especially for financial management duties. Other employers may reward those with impressive scores with promotions and better remuneration packages, as they deem these employees to be more responsible.
For government agencies to provide you with resources
Credit bureaus are required to cooperate with government agencies after establishing that the agencies deserve access to your credit information. The government agencies may need to ascertain your creditworthiness if you need public resources or assistance, for example government-subsidized loans for education or for starting a business.
For landlords to determine your capability to pay rent
When you are seeking an apartment to rent for personal use or a building space for business, the landlords or letting agencies need to know that you can pay your obligations on time. They may also use the credit reports to determine how much of a deposit to demand from you and for other precautionary measures.
Credit reports are used to evaluate people in various ways, as you can see from the above discussion. Different interested parties may want to view your credit report, and the credit bureaus have lists of those who can access your credit information and the level to which they are able to do so.