by Kailey Hagen | Updated July 21, 2021 - First published on Dec. 2, 2019
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Everyone should know about their credit report information.
You probably think you're done with report cards once you're finished with school, but there's one that follows you from the day you open your first credit card or loan account until the day you die -- your credit report. Your credit report information is a record of how you manage borrowed money, and it can affect your chances of getting loans, credit cards, apartments, and even jobs.
It's a pretty big deal, so you ought to know what yours is saying about you. Here's everything you need to know about your credit report information and how you can check yours.
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Your credit reports are what your credit scores are based on. You have three reports, one for each of the three major credit bureaus -- Equifax, Experian, and TransUnion. While these reports are more or less the same, some lenders only report information to one or two of the bureaus instead of all three, so there can be some variation.
Your credit score is a three-digit number that's based on the information in your credit reports. Think of it like a grade of your financial responsibility. Lenders use your credit reports and scores when deciding whether they want to work with you. A good credit score and a report without any concerning information will get you the best interest rates and increase your odds of getting approved. Conversely, a bad credit score and a report with several black marks is more likely to get you denied. If lenders do work with you, they'll probably charge you higher interest rates to hedge their bets.
An increasing number of companies, apart from banks and financial institutions, are also starting to look at credit reports as a way of measuring a person's responsibility. Some employers pull credit reports on prospective employees, especially if that employee will be working in a role managing company or customer funds. Some landlords look at credit reports for prospective tenants before approving them, and even some cell phone and cable providers run a quick credit check when you sign up for their services.
All of these companies must get your approval before checking your credit and you have the right to refuse, but then they have the right to refuse you service, housing, or employment if they think you're hiding something. It's better that you know what's in your credit report and take steps to improve it if there are some red flags there.
Your credit report information covers four key areas: identifying information, credit accounts, credit inquiries, and information from public records.
Identifying information includes things like:
It's all basic information that credit bureaus and lenders use to verify your identity. This information does not impact your credit score in any way, but it is sometimes used to verify your identity when you want to access your credit report. For example, the credit bureau might ask you to select an address you once lived at from a list of options before you can see your credit report. These security questions help ensure that identity thieves don't gain unauthorized access to your information.
Credit accounts are the meat of your credit report. These are records of every loan and credit card in your name. For each one, your report will list:
Much of the information that is used to calculate your credit score comes from here. Payment history is the single biggest factor in determining your credit score, and even one late payment can drop your score significantly. These late payments stay on your credit report for seven years, although their effect on your credit score diminishes with time.
The amount of debt you have is important to lenders, too, because if you have a large amount of debt, you might struggle more to keep up with your monthly payments. Your credit utilization ratio is the ratio between the total amount you charge to your credit cards each month and your available credit limit. This makes up 30% of your FICO credit score, and a ratio exceeding 30% can make lenders wary of working with you.
The type of credit account also matters because lenders like to see a mix between installment debt -- debt with a predictable monthly payment, like a mortgage or car loan -- and revolving debt, like credit cards.
Your credit report contains information on open credit accounts for as long as they are open. Closed credit accounts will remain on your account for 10 years if your account was in good standing and you made all your payments on time. If you had late payments or defaulted on the loan, the credit bureaus must legally remove these records from your credit reports after seven years.
Every time you, a lender, a prospective employer, or anyone else pulls your credit report, it's considered a credit inquiry. But there are two different types. When you check your own credit report or when a credit card company sends you a pre-approved credit card offer, that's a soft inquiry. This type of inquiry doesn't affect your credit score and only shows up when you check your credit reports -- lenders or other parties won't see them.
Hard inquiries happen when you apply for a loan, credit card, or another service where the company wants to run a credit check on you. These inquiries lower your credit score by a few points, but the effect is usually negligible, especially if you're approved for the new credit account. Hard inquiries do show up when others check your credit report, and while a few here and there aren't a big deal, many hard credit inquiries indicate someone who needs a lot of credit to sustain their lifestyle, which can scare off lenders.
However, there is an exception for normal credit-shopping behavior. The credit scoring models recognize that it's normal to shop around when considering taking out a loan or mortgage, so they usually count all inquiries that take place within 30 days as a single inquiry to minimize the effect on your credit score.
Your credit report shows all the credit inquiries on your credit report within the last two years, but again, lenders can only see the hard credit inquiries. The soft credit inquiries are only visible to you.
Your credit report also lists any financial information that's in the public record, like bankruptcies and accounts sent to collections. Repossessions and foreclosures also show up here. You don't want to have any information in this part of your credit report because everything that shows up here is bad and can seriously drop your credit score. All of these negative records will remain on your credit report for seven years, except for bankruptcies, which remain on your credit report for 10 years.
There are a lot of misconceptions about the information your credit report contains and which factors affect your credit score. Here are a few things that don't appear in your credit report or impact your score in any way:
The information in your credit report is strictly related to your history of credit management and does not contain any information unrelated to credit, apart from the basic identifying information outlined above.
Everyone is entitled to one free credit report per bureau per year by federal law. You can access yours at AnnualCreditReport.com. You'll have to answer some security questions to verify your identity and then you can view your reports. You have the choice to view all three reports at the same time or to space them out throughout the year.
If you've already used your annual free credit reports for the year, you can purchase additional credit reports from the credit bureaus themselves. Some credit monitoring companies may also offer credit reports to customers who sign up for their services.
You should check your credit report at least once per year to verify that all the information is accurate. If you notice any accounts that you don't recognize, notify the credit bureau and the financial institution associated with the account right away. They may have confused you with someone else who has a similar name, or someone may have stolen your identity and opened a fraudulent account.
You should also notify the credit bureaus and associated financial institutions if you notice anything incorrect on your existing credit accounts, like a payment mistakenly being recorded as late or a closed credit account with negative marks still showing on your report after seven years. Provide any documentation you have to prove that the information was inaccurate, like proof that you paid your bill on time. This can help speed up the investigation into your dispute.
It's also wise to check your credit reports before you apply for a new loan, credit card, or job where the prospective employer wants to run a credit check. Looking it over can help you better assess your chances of success and avoid being denied due to poor credit.
If your credit report doesn't reflect positively on you and you have some time, take steps to improve your credit before applying for that new credit account, job, or apartment. Always pay your bills on time, try to keep your credit utilization ratio under 30%, and apply for new credit sparingly.
Your credit report is never going to go away, so make sure yours reflects you in a positive light. Look it over today, correct any errors you find, and make sure that you manage your credit accounts responsibly going forward. That way you won't have anything to worry about the next time someone wants to pull your credit reports.
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