4 Myths about Credit Reports you Probably Believe

Knowing what a credit report contains is only a part of understanding what it does. You may have checked your report a couple of times, but with some misconceptions about the process that surrounds the usage of information on the report. Here are four myths that circulate about credit reports, but that are certainly not true.

The credit bureau decides what information to put on your credit report

The credit bureau is a reporting agency that shares credit information with prospective lenders. These information have been submitted to the bureau by lenders, and is only accessed by the lenders when they need to perform a credit check on you. Credit bureaus have a format of reporting information, and this can differ by bureau. So, a typical credit report will have sections for a person’s personal details (name, date of birth, etc.), as well as sections for past and current loan facilities, their repayment status, and the institutions that advanced them. 

On no account is any credit bureau involved in the type of information on your credit report. The format for reporting is what the bureau provides, while the lender provides the information.

You didn’t get the loan because you don’t have a credit report

A credit report is a history of a person’s credit activities. This can include cash loans, mortgages, car loans, or business loans. For someone who has never taken any form of credit, such a person definitely will not have a credit history. 

The myth is that lenders deny loan applications because they could not find a credit history for a person, and as such are not able to determine the creditworthiness of the person. This is not so. Not having a credit history is not a reason for your loan application to be denied. It may make the approving officer wary of the type of borrower that you will be, and they may need to require other proofs that you can/will repay a loan if advanced. But not having a credit history will not automatically disqualify you. 

A credit report is enough to get a loan

A credit report is important when a lender is deciding if to give you a loan, but it is not enough in all cases. A lender wants to know how you have borrowed money in the past, your repayment pattern, and what other loans you currently have running that could impact on your ability to repay them. All these are very important information. But more importantly, every lender has their own set of criteria that is used in determining if to grant credit, and it is not just a credit report alone.

For example, a lender may require that you produce a form of collateral, a guarantor, or a certificate of incorporation for your business. They could also ask for your work payslips or letter of introduction from your employer. All these are possible factors that add to the decision to grant or deny a loan application.

Your loan application was denied because of your credit report

In the same way that a credit report is not the sole determinant of credit approval, it is also not the only reason why a credit application is denied. It can be, but not in every case. You may have a credit history that shows that you repay your loans at the appropriate time without defaulting, but be unable to provide other supporting documents required by the lender. If for example you are unable to provide a satisfactory collateral for the loan, a lender may refuse to advance you credit. This has nothing to do with the contents of your credit report.

In instances where a lender denies your loan application due to your credit report, this means that they have found information from your history that indicates that you may not be a good borrower.

Have you ever believed any of these myths about a credit report? Join the conversation with us on Twitter (@CRCCreditBureau) and on Facebook (CRC Credit Bureau Limited).