Home > Credit 101 > What Your Credit Reports Won’t Tell You

Comments 0 Comments

A credit report is a pretty simple concept: It’s a report on your past use of credit and loans. That part is generally pretty easy for people to grasp. It’s some of the other stuff on the report — and the stuff that’s not on the report — that confuses some and leads to misunderstanding the credit report’s purpose.

As a consumer, it’s important for you to review your credit reports regularly, because inaccuracies can seriously harm your credit standing. You’re entitled to a free annual credit report from each of the three major credit reporting agencies — Equifax, Experian and TransUnion — and you can improve your ability to manage your credit by reviewing your reports and learning from the information they contain.

At the same time, credit reports are limited sets of data. Here are four things you will not learn from your credit report (but don’t worry, you can get this information in other ways).

Reasons for Inquiries

There’s a section of your credit report listing the instances when people or companies requested your credit report, also known as inquiries. Soft inquiries, sometimes called account review inquiries, may happen without your knowledge, but they also don’t impact your credit standing.

It may come as a surprise to see a list of companies that reviewed your credit, and the inquiry is often not accompanied by an explanation. A common reason for a company to make a soft inquiry is to decide whether or not to extend you an offer (think of all those credit card mailings you receive), and you’re not affected by inquiries for marketing purposes. You should know when and why there’s a hard inquiry on your account, because you have presumably decided to apply for credit, and a credit check is part of the deal.

How to Improve

If you know what you’re looking for, it can be pretty easy to figure out what areas of your credit history need attention, but a credit report isn’t going to spell it out for you. Sure, you can add up all your credit limits and credit card balances, do some math and figure out your credit utilization rate. You can also calculate the average age of your accounts and determine if you need to do a better job making loan payments on time.

You can also learn those things without all the legwork. For example, a free Credit.com account allows you to review your credit standing and the factors most helpful or damaging to your credit. You can also easily make a three-step plan to improve your credit over the course of six months.

If You Qualify

It’s crucial to review your credit report before you apply for something like a home or auto loan, because you don’t want credit report errors to derail your financing plans. At the same time, your credit report simply isn’t going to tell you what interest rates you’ll qualify for, or anything like that. The good news is you can shop around for mortgage and auto loans within a short period of time with little impact to your credit score (the same does not apply to personal loans or credit cards), and your credit score will help you figure out where you stand, in terms of creditworthiness.

Credit Scores

You’re not going to find your credit score on your credit report. They’re two different things, though they’re intertwined. You may see an option for purchasing a credit score when you request your credit report, but keep in mind that there is no “best” credit score. There are hundreds of scoring models, and you never know which one your potential lenders will use to aid their decision-making.

With a free Credit.com account, you can see two of your credit scores, and you can track how they fluctuate from month to month. Comparing the same score over time will give you a great idea of how your credit standing is changing, which makes it an excellent tool for those who want to improve.

More on Credit Reports and Credit Scores:

Image: monkeybusinessimages

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team