Guide to Understanding Your Credit Reports
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At a Glance
Your credit report hosts a variety of information such as your credit history, personal information, and more. The details on your report then helps determine your credit score, both of which are used by lenders and creditors when determining whether to approve your credit application and other factors related to your loan.
It’s important to check your credit report to ensure the information is correct and stay on top of your credit score.
In this article, you’ll learn:
- Credit report and its importance
- Credit score vs. credit report
- How credit reports work
- What’s in a credit report
- How your credit report is used by lenders
- Why you should check your credit report
- Check your report for free
- How to read a credit report
- How often your report is updated
- Monitor your credit for free
- Dispute errors on your credit report
What is a credit report and why is it important?
A credit report is a detailed breakdown of your credit history, including your payment history, types of credit accounts you have, credit limits, and other information. The three main credit bureaus – Experian, Equifax, and TransUnion – collect these financial and other details about you and create a credit report based on that information. Then, lenders use these reports (along with other information) to determine your creditworthiness.
Each credit bureau has slight differences in the information they gather and the way they calculate that data to determine your credit score, which means you have different scores and your credit reports may vary slightly, but they are generally relatively similar.
Companies use the data from your credit report to predict how likely you are to be able to afford and repay debts on time. This includes credit cards, personal loans, mortgages, auto loans, and more. Additionally, information on your report significantly affects what interest rates you’re offered as well as the loan amount and terms you’re approved for.
Plus, credit history can also affect insurance prices, utility deposits, and even job applications.
People who can access your report include:
- Others legally allowed to access the report
Credit score vs. credit report
Your credit report is the report, or statement, that includes a variety of information about your financial and borrowing habits.
A credit report then plays a significant role in determining your credit score because scores are calculated using the information from your credit report. Essentially, your credit score is a three-digit number that summarizes your credit report.
Keep in mind that just as there are multiple credit reports, there are also different credit scores that can vary based on factors such as what credit bureau’s report gave the information.
Learn more: Credit Score vs Credit Report
How do credit reports work?
Credit reports include a variety of personal, employment, and financial information. They also include a credit history summary, such as the type and number of bank or credit cards you have, their status, and details related to balances, credit limits, the date accounts were opened, and more.
Additionally, the report lists credit inquiries or accounts turned over to collections agencies as well as other negative information (like bankruptcies). Typically, negative information stays on your report for seven to 10 years.
What is in a credit report?
Credit reports can be lengthy because they include several different types of information such as:
1. Personal information
At the top of the report, you’ll find information like your:
- Date of birth
- Phone number
- Social Security number
- Spouse or co-applicant
2. Credit history
The next part is the largest part of the report and includes details on all of your credit accounts, including:
- Revolving credit, like credit cards and lines of credit, and
- Installment loans, such as auto loans, personal loans, mortgages, and others.
These accounts are listed as “open,” “closed,” or “negative,” and you’ll see information regarding payments, those that have been charged off, or any that have been sent to collections.
Information listed related to your credit accounts include:
- Type of account
- Name of lender
- Credit limit/loan amount
- Account balance
- Payment history
- Date opened and closed (when applicable)
3. Public records
If you have any bankruptcies, judgements, foreclosures, or tax liens, it will be included in this section. Note this doesn’t include public records that aren’t financial-related, such as arrests.
4. Credit inquiries
In the next section, you’ll find a list of all entities that have recently pulled your credit report, such as if you:
- Apply for a credit card
- Request a credit line increase
- Apply for a loan
- Apply for a mortgage
- Apply to rent a house or apartment
- Open an account for phone, cable, or internet services
When your credit report is pulled, it triggers that hard credit inquiry that can decrease your score by a few points for a short period of time. However, multiple inquiries in a short period of time can impact your score much more significantly.
Note that soft inquiries do not affect your score though they are still listed on your report. This may happen when you:
- Check your own credit report
- Get a quote from an insurance company
- Get prequalified or preapproved for a credit card or loan offer
- Apply for a job that requires a background check
Related: Do Credit Inquiries Affect Your Score?
5. Employer history
Employer history isn’t always on your report, but it’s possible for current and past employers to show up on your credit report if they’ve been listed on a credit application you submitted. In some cases creditors ask for employment information, which would then get passed to the credit bureaus and added to your report.
Note this is never factored into your credit score.
6. Consumer statements
Consumer statements can be added to your credit report. These are optional statements (up to 475 characters) that you can add to explain a disagreement with the outcome of a dispute investigation, or provide additional information about items on your credit report.
Types of consumer statements include:
- Account-specific statements linked to a specific account in your credit history. For example, you can add a statement to explain circumstances around a delinquency that was a result of extended unemployment. These are deleted at the same time the account is deleted.
- General statements apply to multiple entries in your credit history, or to your entire history. This may be applicable if, for example, you become delinquent on multiple accounts because of extended unemployment. These remain on your report for two years.
If you choose to add a general statement, you should also contact the credit bureau and ask them to remove it when the accounts in question are no longer on your credit report. This is because statements may unnecessarily notify lenders that you had payment issues in the past and that could impact your eligibility.
What is not in a credit report?
On the other hand, there are some things not included in a credit report including:
1. Income and employment status
Your credit report will not include income or employment status information in order to better protect your privacy and ensure you’re only judged on your credit history, not employment status.
However, when you apply for a loan or credit card you may be asked to provide employment and income information separately.
2. Marital status
Your credit report doesn’t include any information about your marital status or your spouse’s credit history. Credit history and creditworthiness are built separate from each other.
3. Personal assets
Personal assets such as real estate are not included to protect your financial privacy and keep your asset information secure.
4. 401(k) information
Information about 401(k) balances, loans, or payments are not included on your credit report.
How is your credit report used by lenders?
When you apply for a credit card or loan, the lender will run a hard credit inquiry to pull your credit score and report. Depending on what they see in your report, they will decide:
- If they will approve or deny your application.
- What interest rate they will offer.
- What loan amount or credit limit to approve.
- Your loan’s terms.
Why should you check your credit report?
Experts recommend that you check your credit report regularly, and there are a number of benefits to doing this such as:
1. Finding inaccurate or incomplete information. Sometimes, something may be inaccurately reported to the credit bureaus and therefore an error appears on your credit report. You’ll want to ensure your personal and credit account information is complete and correct. If not, contact the company reporting the information or dispute the information.
If you see something that you believe is the result of fraud, contact the company reporting the information and let them know there’s a possibility of fraudulent activity. Be sure to check your report from all three credit bureaus in this case.
You’ll also want to be sure your lenders and creditors are accurately and completely reporting your payment history, and that any old information that may be considered negative has been removed after the correct period of time.
2. Knowing what lenders will see. If you’re planning to apply for a credit card or loan in the near future, especially if you’ll be making a large purchase like a house, knowing what’s on your report ahead of time can help you prepare and improve your credit score if necessary.
3. Ensuring hard inquiries are accurate. Sometimes, lenders and creditors use third-party companies to pull credit reports when you submit an application. In this case, the inquiry company name may not be known to you and likely won’t be the same as the lender. If you see something that’s unfamiliar, don’t hesitate to check with the lender to ensure it’s accurate.
4. Being aware of your credit score. Whether you’re trying to establish credit, improve a bad credit score, or further increase a good score, checking your credit report can give you an idea of what your score is and what factors may be impacting it. This can help you know where you can focus improvements.
How to check your free credit report?
You can get one free credit report each year from each of the three credit bureaus at AnnualCreditReport.com. You can also get one free credit report each year directly from the three credit bureaus.
How to read a credit report?
Once you obtain your free copy, make sure you check what’s listed for your:
- Personal information.
- Credit history, including open and closed accounts, payment history, current balances, names of creditors and lenders, credit limits or loan amounts, and account status.
- Public records.
- Credit inquiries, including hard and soft inquiries.
Look out for typos or incorrect identity information, credit or payment history inaccuracies, or multiple hard inquiries you may not have made.
Learn more: How to Read a Credit Report?
How often is your credit report updated?
Your credit report is updated as new information is reported by lenders and older information is removed. In most cases, changes in account status (such as payment history) is reported every 30 days. It’s recommended to check your credit report once a month.
How to monitor your credit for free?
Credit reports can be critical tools to detect identity theft and fraud. For example, if someone uses your personal information to open a new credit account in your name, your credit report is one of the first places the fraud may appear. Generally, monitoring your credit can help you catch signs of fraud sooner so you can take action faster.
Many banks and credit card companies offer free credit monitoring services that come from being a customer. You can also check your credit report once a year from AnnualCreditReport.com or each of the individual credit bureaus.
Related: What is Credit Monitoring and is it Effective?
Errors on your credit report
Common errors people find on their credit reports include:
- Errors in personal information such as incorrect name, phone number, or address.
- Accounts belonging to someone else with a same or similar name as you.
- Incorrect accounts.
- Closed accounts reported as open.
- Accounts incorrectly reported as late or delinquent.
- Being listed as an account owner when you’re just an authorized user.
- Incorrect date of last payment date.
- Same debt listed more than once.
- Accounts with an incorrect current balance or credit limit.
- Accounts appearing multiple times but with different creditors.
How can you dispute errors on your report?
When disputing and/or correcting an error, you can:
- Contact the credit reporting company.
- Contact the company that provided the information to the credit reporting company.
Typically, you can dispute the information by mail or by submitting a request online. You’ll need to provide identifying information, a list of disputed items, explanations of the inaccuracies, and any supporting documentation.
Related: Can Disputing Credit Report Hurt Credit?
Negative information on credit report
Negative information on your credit report lowers your credit score and can include:
- Late payments
- Delinquent accounts
- Accounts that have been sent to collection
- Short sales
- Deeds in lieu of foreclosure
Too many negative items, or even one severe negative item, can significantly impact your credit and your ability to qualify for loans.
Note that negative information remains on your credit report for either seven or 10 years, but having accounts in good standing can help reduce the impact of those negative items over time.
Missed payments and other public record items remain on your report for seven years, while Chapter 7, 11, and 12 bankruptcies remain for 10 years. Positive information remains on the report indefinitely. Hard credit inquiries will be on your report for two years.
Information is stored from credit grantors and public records in compliance with the Fair Credit Reporting Act. However, you can dispute inaccurate information and ask for it to be removed.
You can access credit reports for free once a year from AnnualCreditReport.com or from each of the three credit bureaus. If you do pay for a credit report, you’ll pay as little as $1 and legally the bureaus can’t charge you more than $12.
Related: Should I Pay for My Credit Score?
No, requesting your credit report does not impact your credit score.
It’s recommended to check your credit reports at least once a year, or before taking out a loan or applying for a new job. There are some other situations when you’re entitled to a free credit report such as if you believe you’re a victim of fraud, are unemployed and planning to apply for a job, are receiving public welfare assistance, or others.
Different credit scoring models and the fact that all three credit bureaus are different companies and maintain their own credit information means it will slightly differ at any point in time. There are several different credit score brands, variations, and generations in use which can lead to different credit scores and reports.
If you need to update personal information, you can update your information with your creditors. For example, be sure to update your address with all creditors if you move and then that will be updated on your credit report the next month. Or, you can make a direct request to the credit bureau. In this case, you may need to send proof of the change.