Credit reports are statements that record information about your loan and debt-paying history and the current status of your credit accounts. Lenders use them to determine loan applicants’ creditworthiness. Here’s our guide to credit report essentials. We’ll cover what credit reports are, how to get them and how to read them once you have them. Read on to learn answers to what you need to know about credit reports.
In This Piece
- What Is a Credit Report?
- Why Is Your Credit Report Important?
- What Is on Your Credit Report?
- Who Can See Your Credit Report?
- What’s the Difference Between a Credit Report and Credit Score?
- Why Should You Check Your Credit Report?
- Errors on Your Credit Report and What to Do with Them
- Credit Report FAQs
What Is a Credit Report?
A credit report is a document that gathers data about your credit history and current credit situation. Your credit reports are maintained by the credit bureaus—there are many, but three main bureaus are Experian, Equifax, and TransUnion. Credit information is reported to the credit bureaus by your lenders. They aren’t required to report information to the bureaus, which means that the credit reports created by each bureau will be slightly different from each other.
Why Is Your Credit Report Important?
Your credit report is important for a number of reasons, including:
- It’s used to calculate your credit score. Credit scoring algorithms use the information in your credit report to determine what score you have. Lenders, landlords and others check your score when evaluating you for credit or other opportunities.
- Lenders and others can look at your report if you allow it. When lenders or anyone else conducts a credit check—with your permission—they can see what’s on your credit report. Negative information like late payments, collection accounts, or bankruptcies can reduce your ability to get a loan or credit card.
- It can help you know if you’re the victim of fraud. Unusual activity on your credit report, such as accounts you didn’t open, could be one of the first indications you’re the victim of fraud or identity theft. Checking your credit reports regularly can help you be proactive in handling such situations.
- It can impact other areas of your life: including your employment eligibility at specific jobs, whether you have to put down a deposit for utility services, or whether you can rent an apartment. If the information in your credit report is inaccurate, you may not be qualifying for the loans, rates, and opportunities that you deserve.
What Is on Your Credit Report?
Credit reports include information about loans and other debts you’ve had in the recent past—around the last seven to ten years. This will include open and closed accounts and whether your payments are made on time or if you have defaulted on any accounts. Credit reports also include information about where you live and work as well as certain public records such as bankruptcies.
Credit reports include four major sections:
- Personal information: This is information that’s used to identify you. It can include your name, address, date of birth, and current and former employers. None of this information is used in the calculation of your credit score.
- Credit accounts: This section includes all credit accounts that have been reported to the credit bureau. That can include your loan and credit card accounts. The report covers details for each account listed, including dates opened and closed, balances, credit limits, whether you made payments in a timely manner, including data about any late payments.
- Public records and collections: Bankruptcies are public records that are listed on your credit reports. They’d be listed here. Collections accounts can also show up here. For example, if you don’t pay your cell phone bill and the account is turned over to collections, it may show up on your credit report.
- Credit inquiries: When someone checks your credit to evaluate you for a loan or other form of credit, it’s known as a hard inquiry. When your credit is checked for a different reason, such as a preapproval for a loan, it’s known as a soft inquiry. Both of these are listed on your credit report, although creditors can’t see soft inquiries.
Who Can See Your Credit Report?
Almost anyone can pull your credit report with your signed permission. Beyond this, your credit report isn’t available to the general public. Your financial information is given only to authorized parties who legitimately need it.
Parties that may be allowed to access your credit report for legitimate reasons include:
- Lenders, including banks, creditors, and student loan providers
- Landlords evaluating you for a lease
- Utility and service providers evaluating your ability to pay bills
- Home and auto insurance providers evaluating you as a policy risk
- Employers considering you for specific jobs, such as jobs handling money
- Debt collection agencies
- Government agencies, such as welfare agencies or IRS auditors
Entities may be able to view your credit report without your permission in a few specific situations, like child support determinations or in response to court orders or grand jury subpoenas. The inquiries section of your credit report will show you who’s viewed your credit report and when, so you can make sure no one is reviewing your personal information inappropriately without your permission.
How to Stop People from Accessing Your Credit Report
You can take actions to keep the information on your credit report even more private by asking for a credit freeze. You can request these from each of the credit bureaus. You’ll need to ask for a freeze from all three bureaus, as they don’t communicate with each other to pass on such requests.
A credit freeze locks your report from almost everyone. No one can access it for the purpose of evaluating you for a loan or other form of credit when a freeze is in place. In fact, if there’s a freeze in place, banks can’t even check your credit when you apply for a loan. You’ll need to take the freeze off temporarily if you intend the apply for credit.
You can also put a fraud alert on your credit report. This ensures banks and other lenders that pull your credit see that you believe you might have been a victim of identity theft. It can signal them to take extra precautions to verify the identity of the person applying for a loan or credit card.
What’s the Difference Between a Credit Report and Credit Score?
A credit report is not the same thing as a credit score. A credit score is a three-digit number meant to reflect the likelihood that you’ll pay your debts as agreed. These scores aren’t included in credit reports but are based on the information in your credit reports.
Credit scores are supplied by different providers than credit report providers. Leading credit score providers include FICO® and VantageScore. Each credit score provider uses its own scoring system and criteria. Both credit reports and scores can vary depending on various factors, including:
- The credit reporting agency providing the information used to calculate the score
- The credit scoring provider and their scoring model
- The type of loan product the scoring model is being used to assess risk for
- The day the score is calculated
Higher scores reflect a better loan repayment history. They may make you eligible for lower interest rates, but this depends on the lender’s policy.
Errors on your credit report can reduce your score artificially, altering your credit report appearance when third parties request it. This could mean a higher interest rate and less money in your pocket, making it in your best interest to monitor your report for accuracy.
How Are Credit Reports Used?
What is the purpose of a credit report? Credit reports and scores are used in different ways by different parties:
- Lenders may use credit data to evaluate your ability to repay a loan or credit card debt, affecting their decision to approve your application and the interest rate they offer you.
- Landlords may check whether you can afford to rent from them.
- Utility and service providers may check your history of paying bills on time to assess you as a risk.
- Insurance providers may use credit data to make approval decisions and set premiums.
- Employers may review credit data to assess whether hires pose a risk of theft or fraud because of financial distress or poor spending habits. Employers don’t see raw credit reports but modified versions which delete information that would violate nondiscriminatory hiring laws, such as date of birth or information they don’t need to know, such as account numbers.
- Debt collectors may review credit reports to locate you or to check whether you have the means to pay other creditors besides their client.
- Government agencies may check credit data for various reasons, including assessing eligibility for public assistance, determining the ability to pay child support, or auditing tax filings. In some cases, government agencies may obtain credit data indirectly through third-party providers rather than viewing it directly.
Beyond such legitimate uses, your credit report’s other uses are restricted. For example, your report can’t be used for legal proceedings such as divorce, child custody, or immigration cases. District attorneys can’t access your report for civil or criminal cases.
Why Should You Check Your Credit Report?
Checking your credit report can help you in many ways:
- Understand your current credit position so you can better manage your personal finances to improve your credit score and ability to qualify for loans
- Be more aware of what lenders may see so you have a better idea of which loans you’re likely to qualify for, reducing the risk of being turned down
- Detect any inaccurate or incomplete information so you can have it corrected
- Detect identity theft so you can take steps to protect your finances
These benefits make checking your credit report an essential procedure for managing your finances effectively.
Errors on Your Credit Report and What to Do with Them
The credit reporting agencies aren’t infallible, and credit reports can have errors on them. They can range from simple typos to entire accounts that aren’t yours.
How Do Errors Appear on Your Credit Report?
Errors can show up on your credit report in a number of ways. Here are just a few:
- Typos: Fingers can slip, names can be misspelled, and numbers can be transposed. For example, your credit card balance might be $1,250. That’s very different from $2,150, but the difference on paper is a simple typo.
- Incorrect reporting: For example, you’ve paid your car loan on time every month, but the bank has made a mistake and reported your last payment as late.
- Mistaken identity: You might be Joe Smith, Sr. Your son is Joe Smith, Jr., and his credit records are starting to show up on your report due to a mix-up as to who is who.
- Fraud: If someone steals your identity and uses it to open accounts in your name, those accounts can show up on your credit reports.
How to Fix Errors on Your Credit Report
You have a right under the Fair Credit Reporting Act to an accurate credit report. So, if you inform the credit bureau that you believe it’s published an error on your report, it must act to investigate. You can start this process by disputing the inaccurate information on your credit report in writing with a credit dispute letter or by following each credit bureau’s online dispute process.
Credit Report FAQs
How Do You Check Your Credit Score for Free?
You can get a free credit score via the Credit Report Card from Credit.com. There are other products that provide free informational credit scores as well. It’s important to note that there are numerous credit scoring models—your free credit score from Credit.com is your Experian VantageScore 3.0. While your informational score can help you understand how you’re doing with credit, it is unlikely to be exactly the same as a score a lender pulls at any given time.
What Is the Difference Between Your Credit Report and The Credit Report Card?
The Credit Report Card is a free product offered by Credit.com. It provides information about your credit report and breaks it down into five areas that most impact your score to see how you’re doing with each. You can get your full credit reports from AnnualCreditReport.com for free or with a paid subscription through ExtraCredit®.
Does Your Credit Score Come with Your Credit Report?
Your score doesn’t automatically come with your credit report or vice versa. You’ll need to request that information separately or use a service like the Credit Report Card or ExtraCredit.
Is It Really Free?
Yes, when you request your credit report from AnnualCreditReport.com, it’s really free. It’s also free to sign up for the Credit Report Card, but that doesn’t include your full report.
Is It Accurate?
The information in your credit report is constantly changing, and there are three main bureaus with potentially different information. So, while Credit Report Card is accurate, it’s only as accurate as the information in your credit report when it’s pulled and uses the information from Experian.
Is It Safe?
Requesting your credit report or signing up for reputable services such as the Credit.com Credit Report Card or ExtraCredit is safe. In fact, by ensuring you know what’s on your credit report, you can help safeguard your identity and credit. Odd items on your report or a sudden change in your score can be signs of identity theft. If you’re using a credit monitoring service or getting access to your credit report, you know about those issues early, which can help you stop them before you suffer significant losses.
How to Keep Up with Your Credit Report
You can order your free credit report from each of the major bureaus via AnnualCreditReport.com. You can also get ongoing access to your credit reports, view 28 different FICO scores and get money-saving offers by signing up for ExtraCredit.
