Everyone will need credit in their life at one time or another. Sometimes this is due to an emergency or unexpected financial problem, but typically it comes from long-standing goals and plans. When a person wants to own their own home, buy a new car, or purchase something they’ve dreamt about for years such as a boat or vacation cottage, there becomes a need for a mortgage loan, car loan, lines of credit, and credit cards. When you ask for credit of any kind, the business to which you are applying will get information about your credit history. They get this information from a particular company that is in the business of collecting data and information about consumers and their credit habits and that ranks or rates these accordingly. So if you wonder just where and how credit reports originate, it’s from these companies that are in business to do just that—create credit reports.

Getting credit or a loan from someone isn’t always easy and really, should you expect it to be? These companies need to know your history so they understand your “track record” of how you have dealt with other lenders and paid back credit in the past. These past credit activities will includes loans and lines of credit you’ve had previously and if there was ever a need for action to be taken against you because of late pays, missed payments, and so on.

When you fill out a credit application, you hand over your name and other pertinent information, including your Social Security number, information about your employment, and so on. The lender takes this information and pays another company, known as a Consumer Reporting Agency or CRA, to give them additional information about you. These CRA companies keep all this information on their databases and they actually began collecting it the minute you applied for any type of credit previously. So for anyone to whom you apply for credit, this information is going to help determine their answer.

You may have also heard about your financial or credit score and perhaps you wondered how this originated as well. This score or rank also comes from those major CRA companies, namely, Equifax, Experian, and TransUnion. These are the largest companies in the U.S. that gather information about consumers and those who have credit. These companies are actually so large that they have information on 500 million credit holders all over the world. That’s one in every 12 people on the planet!

Checking your credit report is important. You should understand your score and try to improve it if necessary. You also need to be sure there are no mistakes on your report. Once you understand all the information that these agencies collect and maintain, you understand how mistakes can be and often are made. But a federal law in the U.S., called the Fair Credit Reporting Act, says that you have the right to request and review a copy of your report on a regular basis. So consider doing just that!