What is a credit report?

Credit ratings are very important to lenders because they show your overall financial health and package it neatly into a multipage report that reads something like a report card from grade school. Credit reports are pretty telling, but they’re also not always 100 percent accurate, so be prepared to deal with any inaccuracies that may come up during the review process. Credit-reporting agencies prepare the reports. There are three reporting agencies and they all have slightly different ways of determining your financial health although they are focused on the same task at hand. The three main reporting agencies are Equifax, Experian, and Trans Union. If you have concerns about your report and what lenders will see on it, it would be wise to order a copy of your credit report (typically for a nominal fee) via phone or on the Web from:
Once you’ve filled out your loan application, the lender will order your ‘‘score,’’ commonly known as a FICO score (for Fair Isaac & Co.), from one or more of the reporting agencies just listed. Lenders also use salary, length of employment, and other factors when making their decision, but the FICO score is one of the first places they look. Some lenders use one of the three scores while others select the ‘‘middle’’ score as a measure.