What Is a Credit Report?

Credit Report Basics

Are you punctual in paying your credit cards? Have you missed a loan payment? What are the balances of your credit card accounts? Have you filed for bankruptcy? All these pieces of information are there on your credit report kept at each of the three main credit reporting bureaus—Experian, Equifax, and TransUnion.

Why is this information important? The answer is your prospective lenders are very concerned about whether you are a good credit risk. After all, they want to be paid back and the data on a credit report will help them decide if you are creditworthy. At the same time, the credit reporting bureaus are for-profit agencies, and they want to provide accurate information. Your credit report may not seem like an important part of your life since it hovers unseen in the background, but it comes to the forefront when you need a place to live, or apply for credit, insurance, or a job. If it reflects adversely against you, it can cause personal and financial headaches. A credit report is also where indications of identity theft or fraud may first reveal themselves.

Parts of a Credit Report

  • Personal information:  Your name, address, phone number, Social Security number, spouse, and date of birth are stated on it. It may include your present employer and previous employers, and former home addresses. Different spelling variations of your name may be noted.
  • Credit history:  Both current and closed accounts will be listed along with account balances. Late payments will be noted of 30 days and longer. The amount owed on installment loans and mortgages from banks, credit card companies, and auto-finance companies will be included. All information which is accurate will remain on a credit report for seven years, unless errors can be found and then you can request that it be removed.    
  • Public records:  Any filings of personal bankruptcy or court judgments against you will be recorded on the credit report. This information will also remain there for seven years, except for bankruptcies which are listed for ten years.
  • Inquiry section:  When you or a bank, credit card company, or potential employer orders your credit report, it will be appropriately recorded as an inquiry on your report. Inquiries are divided into two types “hard” and “soft.” A hard inquiry is mostly made by a lender from whom you have requested a loan, and an example of a soft inquiry is when you request a copy of your credit report.

Monitoring for Identity Theft

A credit report often bears the first sign that identity theft has taken place.  Consumers need to monitor their own credit reports or employ a credit monitoring service to protect themselves from fraud. A free credit report is available every year from each of the three credit reporting bureaus and additional reports can be ordered for a fee.

Beware of the signs of fraud on your credit report:

  • New accounts opened in your name unknown to you
  • A change of your mailing address from your home to another location
  • Inquiries from sources unfamiliar to you
  • Unexplained debts
  • Inaccurate information on personal information, accounts, employers, or social security number

Credit Score

Your credit report will not have your credit score on it, unless you have paid a fee to have it included. The credit score is a number that ranges from 300 to 850 if it is a FICO score, and it is compiled from the data on your credit report. It is an important factor that creditors look at to help them decide if you are worthy of credit, insurance, a job, or as a suitable renter.

Reference:

Federal Trade Commission, Building a Better Credit Report, March 2008, http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre03.shtm