What Your Credit Report Says About You Behind Your Back

No one enjoys being judged, especially by credit reports. Of course, that’s exactly why your credit reports and credit scores exist — to give others information that may ultimately be used to judge you and your credit worthiness.

Your credit reports are full of information about your past and present credit management habits. That credit information is then used by many companies to judge whether or not they wish to do business with you, and under what terms.

You may not like it very much, but you’re probably already familiar with the fact that most lenders will take a look at your credit reports and credit scores before deciding whether to approve or deny your new loan or credit card application. To a lender, your credit reports say whether or not doing business with you is a good risk.

Yet lenders aren’t the only ones who judge you by your credit. Landlords, insurers, and employers, among others, may want to hear what your credit reports and credit scores say about you.

Will You Make a Good Employee?

Credit reports, not credit scores, are often used by employers to assist with hiring decisions. “But John,” I can almost hear you saying, “My credit has nothing to do with whether or not I’d make a good employee.”

While it’s true that you might be able to do a job just as well as the next person regardless of your credit, the fact remains that your credit reports can and will often be used by employers to assist with hiring decisions, whether you find the practice to be fair or not.

Your credit reports give employers an insight into your level of responsibility — whether you have a track record of paying bills on time and managing debt responsibly, or you tend to miss payments and overextend yourself financially.

Furthermore, employers are sometimes concerned that employees with credit and debt problems could be more likely to steal from them or accept bribes or other nefarious financial incentives.

Finally, if your credit report contains issues such as collections, liens, or judgments, an employer might even be worried about debt collectors calling the office or having to deal with wage garnishments, which are headaches most employers would rather avoid.

How Insurable Are You?

Many consumers are surprised to learn that insurance companies routinely review credit reports and insurance credit scores.

On the surface, it’s often difficult for consumers to understand why your credit matters when it comes to home or auto insurance pricing. After all, your credit has nothing to do with your driving record, right?

However, if you look at the situation from the insurer’s point of view, it becomes easy to understand why insurance companies care about your credit. Insurance companies want to turn the highest profit possible, and they achieve this goal by paying out as little as possible on customer claims relative to the amount they collect in premiums. Studies have shown there is a direct correlation between the condition of your credit and the likelihood that you will file an insurance claim.

Should We Break Up, or Stay Together?

When you apply for an installment loan (think mortgages or auto loans), a lender will generally check your credit report(s) and score(s) only once, at the time of your application, and never again.

That’s not the case when it comes to your credit card accounts, because they can remain open for years or decades, and your credit quality could deteriorate over time while the account is still open and active.

So it makes sense that a credit card issuer would want to continue to monitor a customer’s credit over time. Your credit card issuer will periodically check your credit report data and credit score –sometimes as often as monthly –  be sure that the risk of doing business with you remains the same.

If the condition of your credit begins to falter, even on unrelated accounts, then a credit card issuer might opt to change the terms of your account or may elect to close your account and suspend any future charging privileges all together.

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John Ulzheimer

Contributing Writer

John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. The author of four books on the subject, Ulzheimer has been featured thousands of times over the past decade in media outlets including the Wall Street Journal, NBC Nightly News, The Los Angeles Times, CNBC, and countless others. With professional experience at both Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.