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Home >> Manage Your Money >> Debt Management
What Your Credit Report Says About You
When you meet someone for the first time, you make an instantaneous decision about the type of person he or she is based on a number of factors. You look at the clothes the person is wearing or whether the person wears contacts, glasses, or a hearing aid. You may even look at whether the person has a disability or whether the person smiles first. Based on your observations, you decide whether or not to introduce yourself or further your acquaintance. Lenders are also making the same judgment calls, but instead of looking at whether you ironed your clothes or wore matching socks, the lenders are likely to glean your information from a credit report, and whether you realize it or not, the information can be quite telling.
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Education
Although your credit report does not tell a lender whether you obtained a post-secondary degree or not, your lender will most likely know whether you attended some type of additional education. Based on the amount and type of your loans, your lender might even be able to determine whether you attended private or public school. Based on the amount of your federal loans, the lender might also be able to determine if you have obtained more than a bachelor's degree, since the loan cap changes at the graduate level.
Stability
Your ability to pay your loans tells the lender most of what he or she needs to know about your stability as a credit risk, but the lender also has access to your past addresses and even some of your employment information. In other words, your lender will know how long you have lived at your present address, and how often you change addresses.
Budget Information
The lender might also be able to determine how you allocate your budget. For example, the lender will know the size of your mortgage payment, the amount you pay out monthly for a car or other installment loan, and even whether you have borrowed from the local furniture store for the new couch. Perhaps even more telling is the type of credit cards you have in your wallet. Your lender can determine to some extent at which stores you shop based on your store credit cards and whether you are a sucker for the 10% off specials run by the store credit card companies. Lenders can also tell if you sometimes find yourself unexpectedly without cash and use a personal finance company to make up the difference.
Just as the person you meet is more than the clothes he/she wears, so is your financial history. Unfortunately, just as a first impression is lasting, so is the brief glimpse into your life offered by your credit report. Use this to your advantage.
Published on BankingQuestions.com 8/21/09
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