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What are the Key Contents of a Credit Analysis Report?
What is Credit Analysis?
Credit analysis is an important aspect of business organizations and lenders who offer loans or goods and services on credit. Credit analysis reveals the nature of the customers and shows the potential customer who would be either good or bad in repaying the credited amount. The findings of credit analysis are indicated via a credit report.
A credit analysis report is a very important tool for lenders to grant credit to prospective borrowers. By the contents included in the report, the lenders can offer loans to the best potential borrowers.
A borrower who has a good repayment record is offered loans on favorable terms while those that have a tainted credit history are either not provided any loans or provided with loans that have a higher interest attached to them.
What is a Credit Report?
Credit reports are reports prepared by credit bureaus that show the creditworthiness of a firm or an individual. The report indicates how the customers pay their credit back, the amount that a customer has as unpaid debt, and the duration the customers have been paying their credit bills.
The credit bureaus usually check the accounts that have not been paid or those that have turned into bad debts. The malfunctioning accounts or accounts that have irregularities are also checked by the credit bureaus. The bureaus provide the information to the lenders to help them decide the creditworthiness of their customers.
Key Contents of a Credit Analysis Report
Depending on the nature of a credit analysis report, it may contain some important information that may be helpful for lenders to identify potential customers who would fit the bills. They are as follows −
Identity Information
A credit analysis report contains the identity information of the client which may include the borrower's name, location, date of birth, employment details, and government identity card details. The report may also contain additional addresses, previous company details, and misspelled names if any. The details of identity are used to prevent cases of identity theft.
Credit Accounts
This section contains information about past and current credit accounts that are reported usually by past lenders and creditors. For individuals, these accounts may include personal loans, credit cards, automobile loans, educational loans, and other forms of credit.
For business firms, the credit accounts section may include all types of business loans the firm may have availed in the past and present, and how many of them are being serviced currently by the organization.
Credit accounts reveal the details, such as amounts of loans availed, date of opening credit accounts, and bad debts or mismanaged accounts if any.
Credit Inquiries
This section shows the list of creditors or lenders that have accessed the borrower's credit history in order to assess the creditworthiness of the potential borrower. This may be related to promotional screening or credit card application. The borrower’s version of credit inquiries includes soft and hard versions.
In the case of individuals, soft inquiries are those which represent borrowers’ own requests, lender’s inquiries, and inquiries made by companies offering pre-approved credit cards.
The hard version of credit inquiries includes those inquiries that are made by lenders to check the creditworthiness of the borrower when the latter applies for credit. Only this version of inquiry is included in the lender’s version of the credit report and it is also used while calculating the credit score of the individual borrower.
Bankruptcy and Foreclosures
As is obvious, this section of the report includes the history of bankruptcy and foreclosures. The lenders usually look for borrowers whose past is not tainted and hence those who have a past history of bankruptcy are usually not granted any loan in the future.
Conclusion
In fact, the credit analysis report is a dynamic tool to judge the quality of a borrower. The loans being availed and the repayments are a continuous process and the lenders consider the smooth running of borrowers fulfilling the norms as a leading reason to offer more loans to them on favorable terms.
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