Debt ratings, credit reports and the consumer

2008-01-14 12:09:19

( Financial )



Debt ratings are similar to and almost identical with credit reports and can be used for the same purpose.

Both debt ratings and credit reports provide information on the credit worthiness of an individual, company or institution. These include information from local court judgments, credit reference agencies, banks or other financial institutions. Lenders rely heavily on debt ratings when determining whether or not to approve your loan, credit card or other financial products. Debt ratings and credit reports are also sold to lenders and other credit or financial providers and institutions.

Debt ratings and credit reports include personal information gathered from past credit applications like your name, birth date, and recent and current addresses. However, the focus of debt ratings and credit reports is your credit history which includes a list of your credit accounts complete with loan amount or credit limit and whether you missed any payment. Account details stay on credit reports and debt ratings for years after you close a credit card or settle a loan.

Debt ratings and credit reports also reflect a credit search every time your report is dug up like when you apply for a loan or purchase with interest free credit. These searches reflect on you debt ratings and credit reports for up to two years. Your credit reports also record your current account providers without giving out details unless for purposes of further increasing your credit limit. Publicly recorded information such as property repossessions, bankruptcies and court judgments also stay on your debt ratings for up to six years. Debt ratings and credit reports do not include records of your savings accounts or personal data such as political affiliation, religion, criminal records or medical history. Debt ratings and credit reports are primarily used to generate a credit score but are not part of the report itself.

When accessing your debt ratings and credit reports, financial institutions use information from your report to evaluate how risky it would be to lend you money and how well you have handled credit in the past. Credit reports and debt ratings are both helpful and useless in the sense that you may struggle when borrowing money if you have never used credit or if you have too many credit cards or loans.


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