What Is a Credit Report?
A credit report is a detailed breakdown of your credit history prepared by a credit bureau. Credit bureaus collect financial information about you and create credit reports based on that information, and lenders use the reports along with other details to determine your creditworthiness.
In the United States there are three major credit reporting bureaus: Equifax, Experian, and TransUnion. Each of these reporting companies collects information about your personal financial details and bill-paying habits to create a unique credit report. Although most of the information is similar, there are often small differences among the three reports.
- A credit report is a detailed summary of your credit history that is prepared by a credit bureau.
- Reports include your personal information, details on lines of credit, public records such as bankruptcies, and a list of entities that have asked to see your credit report.
- The three major credit bureaus—Equifax, Experian, and TransUnion—are each required to provide you with one free report each year.
How Credit Reports Work
Credit reports include personal information, such as your current and previous addresses, Social Security numbers, and employment history. These reports also include a credit history summary, such as the number and type of bank or credit card accounts that are past due or in good standing, and detailed account information related to high balances, credit limits, and the date accounts were opened.
Credit reports also list credit inquiries and details of accounts turned over to credit agencies, such as information about liens and wage garnishments. Generally, credit reports retain negative information for seven years, while bankruptcy filings typically stay on credit reports for about 10 years.
Derek Notman, CFP®, ChFC, CLU
Intrepid Wealth Partners LLC, Madison, Wis.
Make sure to review your credit report before you need it. A client of mine was applying for a home mortgage, and when the bank pulled its credit report, there was over $20,000 of credit card debt on the report, but the client didn’t have any credit cards.
What had happened was that the client had the same name as their father, so when the credit report was run, it pulled their correct information but also accidentally pulled their father’s credit card balance.
Make sure to check for errors before you think you will need to apply for credit, so you can have them fixed if there are any. Not doing this could delay your credit decision, cause your lender to think twice about lending you credit, and ultimately delay a time-sensitive purchase.
What Information Is in My Credit Report?
Credit reports typically divide information into four sections. These are:
- Personal Information – The top of the report contains your personal information, including name, address, date of birth, Social Security number, spouse or co-applicant, and phone numbers. In some cases this section may have variations of your name or Social Security number, because the information was reported incorrectly by a lender or other entity.
- Accounts – The second section comprises the bulk of most reports and includes detailed information on all of your credit accounts, both revolving credit, such as credit cards and lines of credit, and installment loans, such as auto loans, personal loans, and mortgages. It will categorize your accounts as “open,” “closed,” or “negative,” and information regarding any accounts that have had missed payments, been charged off, or sent for collection. Each account has its own entry called a “trade line.”
- Public Records – The third section includes public records regarding financial transactions, such as bankruptcies, judgments, and tax liens. It does not include non-financial information, such as arrests or misdemeanors.
- Credit Inquiries – The bottom of the report lists all of the entities that have recently asked to see your credit report because of an event such as applying for a personal loan or seeking pre-approval for a credit card. The former would be a hard inquiry, which can cause a short-lived dip in your credit score. The latter would be a soft inquiry, which does not affect your score. Hard and soft inquiries are generally segregated from each other.
If you submit an application for credit, an insurance policy, or a rental property, creditors, insurers, landlords, and select others are legally allowed to access your credit report. Employers may also request a copy of your credit report as long as you agree and grant permission in writing. These entities typically must pay the credit bureaus for the report, which is how credit bureaus earn money.
Each of the three major credit reporting bureaus in the United States—Equifax, Experian, and TransUnion—provides similar readings on consumers’ financial details, but there are often small differences.
The Fair Credit Reporting Act requires each of the three credit reporting bureaus to supply you with a free credit report once per year. Federal law also entitles you to receive free credit reports if any company has taken adverse action against you. This includes denial of credit, insurance, or employment as well as reports from collection agencies or judgments. However, you must request the report within 60 days from the date the adverse action occurred.
In addition, consumers who are on welfare, people who are unemployed and plan to look for a job within 60 days, and victims of identity theft are also entitled to a free credit report from each of the reporting agencies.
If you are looking for ways to repair your credit, there are companies who can negotiate with your creditors and liaise with the credit agencies on your behalf. There are scammers in the industry, so it’s important to research firms to be certain you’re hiring a reputable credit repair company.