An overview

Credit reporting is your history of debt repayment. When you apply for any type of credit (for example, a credit card or personal loan) the lender must decide if you are likely to repay your debt in a timely manner. Lenders make these determinations by checking your credit report. Your credit report shows the history of how you have repaid debts in the past. A poor credit history will put you at a disadvantage for future credit applications.

You are responsible for your own credit standing- it's up to you to make good choices. However, there are tools available to help you manage and protect your credit standing.

How your credit file originates

When you secure a loan or a credit card, your lender reports what you have borrowed and how you repaid the debt to credit reporting agencies. The credit reporting agencies compile the information about your credit history into a file, referred to as your credit file.

When another company considers you for a loan, they contact the credit reporting agency to access your credit report. With a view of your credit history, the lender can then determine the risk they are taking in offering you credit. The level of risk may often affect the rate or fee charged for their service.

This pattern repeats itself and your credit file continues to build, creating a system that allows you to use credit easily. It allows lenders to get information quickly so they can make efficient decisions about how to provide their credit services.

Lenders evaluate you based on your credit report

Credit reporting agencies compile and maintain the information in your credit file, but they have no impact on any lending decision. Different lenders use widely varying formulas for determining whether to grant a request for credit.