You may know what a credit report is – but do you really, really know? It’s very common for consumers to confuse credit reports with credit scores. Even though the two are related (and both are very important to tracking your credit health), they are two totally different things.
Credit reports are compiled by the three major credit reporting agencies (CRAs) Equifax, Experian and TransUnion. If you’ve had credit in the past, you probably have a credit report. (These reports are often called “credit files” or “credit histories” as well.)
Your credit report is essentially your financial resume. It’s up to you to make sure it is accurate, and to maintain positive references. Your financial future may depend on it.
7 Important Facts About Credit Reports
- The reporting agencies don’t “judge” your credit.Your credit reports are simply a compilation of the facts that the agencies, or credit bureaus, collected about you. It’s up to individual lenders to decide what they deem as “good” or “bad,” which is why they often use credit scores as well. (Want to know what a good credit score is? This article will explain.)
- Your reports can change often.Credit reports are, for the most part, compiled when they are requested. The credit report agency will search its database of information and compile the credit report based on the latest and most current and available data.
- The three major CRAs are private, for-profit companies and they don’t share information with each other. That means there can be a mistake on one report but not another. This is why it’s important to review all of them for any errors (more on disputes in a minute). Meaning, when you monitor one report, you need to take a look at the other two as well.
- The information in your report is used to calculate your credit scores. If the data in any of your credit reports is wrong, the scores may not accurately reflect your creditworthiness, causing you to ultimately pay more in interest charges each month.
- You are entitled to one free annual credit report from each of the credit bureaus every 12 months.In some states, and in some circumstances, you may be able to get additional free copies. To get your free copies of your credit reports, visit AnnualCreditReport.com. Remember to get and review copies from each agency, as this can help you spot any problems with your credit account.
- Lenders aren’t required by law to report information to credit reports. Some companies, such as utility companies and cell phone providers, typically do not report to the credit bureaus. Some may only opt to report to one and not the others. Again, this is why it’s so important to review each of the credit reports for inaccuracies.
- You have the right to dispute mistakes on your reports under federal law, the Fair Credit Reporting Act.If you ask for an investigation, the CRA or creditor who receives your dispute must investigate and respond within 30 days, in most cases.
Who Sees Your Credit Reports?
The list of organizations who can view a version of your credit reports is a limited one. It includes:
- Potential employers
- Insurance companies
- Certain government agencies
They are able to view your credit reports under Federal law because they have the right to check any and all credit references prior to agreeing to do business with you. However, the federal Fair Credit Reporting Act (FRCA) is able to strictly limit who can access a credit report and under which circumstances they are allowed to do so.
A few circumstances in which they can look at your credit reports include a response to a court order or federal grand jury subpoena, employment purposes with your written consent, to help determine child support under certain circumstances, and in connection with a credit or insurance transaction that was not originally initiated by you.
While your permission may be required in a few of these instances, it is not a requirement under all circumstances.
How to Read Your Credit Reports
Your credit reports are broken into several different parts, and you’ll want to review each one carefully for errors and omissions regarding all of your key identifying information. This information includes your name, current and former addresses, your employer (if it’s available), credit card and loan payments, inquiries, collection records and public records such as bankruptcy filings and tax liens.
Each account listed will show your payment history along with other account details like your credit limit, when the account was established, the type of account (installment, revolving,) etc. If you find errors, you’ll want to act quickly to correct them using this guide on how to dispute errors on your credit reports.
Here are the fundamental areas to focus on in your review and anytime you choose to monitor your credit accounts:
This section might not seem all that important, but it definitely is, so follow up on any errors you find. Make sure the spelling of your name is accurate, as well as your address, date of birth, Social Security number and even any suffixes you use, such as Jr., or Ph.D., are correct.
Also, be sure your employers are listed correctly, but don’t be surprised if you see out-of-date employment information. Lenders don’t usually rely on that data, but do investigate if you see addresses that are completely wrong (e.g., you never lived there) or variations of your name you don’t recognize. They could mean your credit information is getting mixed up with that of someone else, or they could be a sign of identity theft.
All of your current and prior credit accounts and their associated details are listed in this section. Check the account numbers (they could be truncated) to ensure they are (or were) yours. Each individual account listing will include:
- Lender name and account number
- Date the account was opened and closed (if applicable)
- Original and current balance
- Monthly payment amount
- Payment history
- Current status (paid as agreed, 30 days late, etc.)
You might see some creditors reporting what your highest balance was on the account. They may also report your credit limit.
Keep in mind that credit reports are compiled when requested. That means that your credit report includes the latest information reported by your lenders. If your lender hasn’t reported that you paid your balance off yet, for example, the last balance reported will show up here. It may take up to 30 days for your current balance to be reported.
This is where major derogatory information goes in your report and, while it’s not fun to look at, it’s still important to ensure all the information here is accurate. Information in this section can include civil judgments, bankruptcies, federal, state and county property and tax liens, and collection accounts.
Dates in this section are particularly important because they can indicate when these derogatory marks will come off your credit reports. Make sure both the dates and balances are reported correctly.
But Where’s My Credit Score?
You won’t receive a free credit score when you get your free annual credit report. However, there are other sources that will give you a truly free credit score, such as Credit.com. The credit score takes information from the report and evaluates it to predict whether you are a good credit risk or not.
A high score means you’re a good candidate to pay back a loan on time. A low credit score might mean you have a history of not doing such a great job of paying back your debts, or you have a limited track record with credit, and are therefore more risky.
You can get your two free credit scores, updated every 30 days, along with a personalized action plan for your credit, at Credit.com.
If you have a higher FICO score, then you may be able to take advantage of lower interest rates which could ultimately save you thousands of dollars.
The Importance of Monitoring Your Credit Report
Monitoring your credit report regularly awards you the opportunity to be able to identify any problems or suspicious activity earlier. Doing so may be able to help curve the financial disaster that can be experienced as a result of fraud and identity theft.
When you monitor your credit, you should always monitor all three bureau credit reports to get a better picture of your overall financial health and well-being. It also offers you the chance to find opportunities to further boost your score or show you areas in which you need to improve or repair your credit score.
Always keep in mind the importance of your credit report and take the steps to protect yourself and your financial future.
This article has been updated. It was first published April 28, 2014.