When a lender takes a look at your credit report, your creditworthiness is being evaluated. What the lender is considering are both your ability and willingness to repay the money that you plan to borrow. Your credit report shows a lot of information both directly and as hints. Thus, it is important to understand what lenders see when they are analyzing your credit report.
Credit history is showed as different entries on your report stating whether you take a loan, cancel a loan, make your payments on time, pay late, miss a payment, request another credit card, apply for a car loan or a home loan, are approved, are rejected, etc. All these entries constitute your credit history and will affect your ability to obtain finance.
Free Credit Report
It is important for you to have up-to-date information about your credit. Thus, you should immediately request a copy of your credit report. Your own credit report must be provided to you for free. Only third parties are charged when accessing your credit report, unless you request a copy of your credit report too often. At least once a year (it depends on local regulations) you are entitled to a free copy of your credit report from each credit bureau.
Your free credit report will include your credit history and all the information that creditors receive when they request your report. Thus, finally, you'll be able to see what others see when they evaluate your creditworthiness. This is important because it will provide you with hints about what you should do to improve your credit score and history.
Avoiding Small Drops On Your Credit Score Due To Inquiries
Multiple inquiries on your credit history can make your credit score drop. However, not all inquiries will affect your credit score equally. Applying for multiple credit cards will affect your credit score the most. Mortgage loans and car loans won't affect your credit score the same way because creditors will infer that you are shopping for a loan, not requesting multiple loans.
Don't Worry About Non-Credit Information
Bear in mind that your credit report doesn't include information that is not related to your credit or financial life. Thus, no racial, nationality, sexual category, marital status, etc. will be taken into account when computing your credit score. Such use of the above mentioned information is strictly forbidden by regulations and there are severe punishments for those who would use it for that purpose.
Additional Information That You Need To Worry About
Though it may not be part of your credit scoring calculations, this information will be included into your credit report and you should concentrate on avoiding negative inputs related to it: The amount of outstanding debt, the number of open credit lines, the balance on credit lines, the ratio between your debt and your income, the ratio of your debt payments, etc. This information is taken into account by lenders when considering whether lending to you is a risky transaction or not. Thus, it will influence your approval and the interest rate and other loan terms in case you are approved.