What Is a Credit Report?
Credit reports contain detailed information about your credit history, including personal identification information, credit card accounts, loans, payment history, bankruptcies and recent inquiries into your credit history. Prospective lenders, with your permission, can obtain the report to determine your creditworthiness.
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How Credit Reports Affect You
Having a good credit report can make your life much easier. Credit reports are very important both for obtaining a credit card or car loan and for other aspects of your life. Who can look at your credit report?
- Lenders.
- Landlords.
- Employers.
- Insurance companies.
Having a bad credit report can cost you a place to live and a job. That's why it's important to take a look at what your credit report says about you. Employers and landlords must ask permission before they pull your report. They use the information on the report to predict your trustworthiness and reliability.
Here are some steps to take to clean up your credit.
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Step One: Obtain Your Credit Report
You can order a copy of your credit report from any of the companies below. To get a truly accurate portrayal of your credit, you must get reports from all three companies, as each agency may show different information.
To order a free copy of your credit report from each of the three credit reporting agencies described below, go to www.annualcreditreport.com. You are limited to one free credit report per year from each of the following credit reporting agencies:
Be prepared to provide the following when you request a credit report:
- First, middle and last name (including Jr., Sr., III).
- Current address.
- Any other addresses you have had in the past two years.
- Social Security number.
- Date of birth.
- Current employer.
- Phone number (both work and home).
- Applicable fee.
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Step Two: Check for Mistakes
After you order your credit report, check it carefully for errors (debts that aren't yours, duplicate information). When you find an error, copy the report and highlight the error. Send it back to the credit reporting agency with an explanation — or better yet, dispute the information online at the agency's Web site. The agency will contact the creditor and verify the information. Creditors have 30 days to respond to a dispute.
- If the creditor does not respond, the information will be removed. The information will probably reappear on your credit report in future reporting cycles.
- If the creditor agrees that the information is an error, it will be removed from your credit report.
- If the creditor disagrees, the information will stay on the report. You then will have to contact the original creditor and provide the creditor with proof of the error. You can add a statement to the credit report that you are disputing the information.
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Step Three: Add a Statement to Your Report
If you have negative information on your credit report, it may have been beyond your control. Medical emergencies, loss of employment or negligence by an ex-spouse are examples of occurrences that can damage credit. In these cases, you may want to add a statement to your credit report.
Concisely state the cause of the issue and the credit reporting agency will post the information below the affected account. Keep it short, clear and to the point. Anyone who looks at your credit profile is required to read the statement. This statement will not affect or improve your credit score, but it will explain why the negative information is there.
Only your creditors can legally change information on your credit report. While uncommon, some creditors may agree to change wording or a rating in a credit report or even remove it. A student loan guarantor may remove a default from your credit report when you rehabilitate your loans after making nine timely payments.
It is vital to maintain a good relationship with creditors even if your payments are past due. They will be much more likely to assist you as you attempt to rebuild your credit.
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What's on a Credit Report?
Personal information: You provide your personal information every time you complete an application for items such as a credit card, cell phone or car loan.
- Full name.
- Address.
- Former addresses.
- Employer names.
- Former employer names.
- Social Security number.
- Your home phone number.
- Other names you have used when applying for credit: John Smith, Johnny Smith, John W. Smith.
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Success Strategy
Always fill out those applications the same way — same name, same Social Security number. Doing so will help the credit bureaus keep your credit report accurate. It is estimated that more than 40 percent of credit reports have inaccurate information on them.
Request your credit reports from all three credit reporting agencies at least once a year to check for inaccuracies. Go to www.annualcreditreport.com to order your free credit report once a year.
You also can get a free report if you are turned down for credit, are unemployed or on government assistance or believe you are a victim of credit fraud.
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Credit Inquiries
There are two types of credit report inquiries.
Type One
Every time a lender buys your name and address from a credit reporting agency to offer you pre-approved credit, it shows up on your personal credit report as an inquiry. These inquiries are considered "soft" inquiries, and they do not affect your credit score.
If you'd prefer not to receive these pre-approved offers, call 1.888.5.OPT OUT (888.567.8688). You can ask the credit reporting agencies to stop selling your name and address permanently.
Type Two
Every time you apply for credit, and the company pulls your credit report, it shows up as a business inquiry on your report. These "hard" inquiries affect your credit score and stay on your report for up to two years.
Subsequent creditors will see with whom you have applied for credit. They will not see who has bought your name and address.
If you apply for a lot of credit in a short period of time, creditors may have questions about why you are looking at taking on so much debt.
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Individual Accounts
The next part of your credit report consists of your individual accounts, known as "tradelines." Tradelines are a lot like grades. They show how you've paid your open and closed credit accounts.
Examples of accounts shown in the tradelines section of your credit report:
- Student loans.
- Credit card accounts.
- Car loans.
- Home loan.
Creditors pay to report to credit bureaus, to ensure that the money you owe them gets paid back. By reporting your missed or delinquent payments to credit reporting agencies, creditors hope to prevent you from getting more credit. Limiting your ability to accrue more debt increases the chances that the money you already owe will get repaid.
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Public Records
The last part of your credit report is a list of your public records. This list includes items on file at the courthouse such as:
- Court-ordered restitution.
- Unpaid child support.
- Unpaid alimony.
- Tax liens.
- Bounced checks.
- Unpaid traffic/parking tickets.
- Car repossessions.
- Evictions from rental house/apartment.
- Bankruptcies.
- While not a public record, accounts sent to collection agencies also display in this section.
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Credit Scores
Commonly called FICO scores, these scores summarize the quality of a credit report with a single number. The higher the number or score, the better the credit report looks to lenders. Different companies can offer different scores, but for the most part, the FICO scoring model gives you an idea of how to increase your score.
FICO breaks down your credit score into the following categories to come up with your total credit score:
- 35 percent: Payment history — Have you paid your bills in a timely fashion? Paying your bills on time has the most significant impact on your score.
- 30 percent: Amounts owed — How much debt do you have? Carrying a high balance on many accounts may indicate that a person will be unable to make timely payments in the future.
- 15 percent: Length of credit history — How established is your credit history? A longer credit history will increase your score.
- 10 percent: New credit — Are you taking on a lot of new debt?
- 10 percent: Types of credit in use — Is it a healthy mix?
What Isn't on a Credit Report?
- Information about utility bills — electricity, phone, water/sewer/garbage.
- Bank account information.
- ATM or check card information.
- Rent.
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