Credit Reports and Credit Scores
A credit report is a record of your credit history.
You credit score is the number assigned to your credit history, and it reflects the information in your credit report.
We break it down for you below.
Credit Report Information
There are six main categories of information on your credit report:
- Identification: Generally your name, birth date, address, and Social Security number.
- Employment: Your employment history, focusing on whether you’re currently employed and where.
- Consumer Statement: If you ever have to dispute an item on your credit report and the dispute isn’t resolved in your favor, you can attach a brief statement (usually 100 words) to your report explaining the situation.
- Account Information: Information about current and past credit accounts (car loans, bank loans, credit cards, etc.).
- Public Records: Credit report companies use various public records, including court records dealing with any bankruptcies or financial judgments against you.
- Inquiries: Information on inquiries made about your credit history.
Credit report companies strive to update this information every 30 days.
Typically, negative credit information stays on your record for seven years or so (10 if certain bankruptcies are involved); positive information tends to stays longer.
Incorrect Credit History Information
Per the Fair Credit Reporting Act (FCRA), you have the right to seek corrections for inaccurate credit information.
You can contact the creditor or lender directly and request a correction, or you can work with the credit report company that provided the history.
Credit Score Information
Your credit score (the number assigned based on information in your credit history) is based on factors like:
- How many and the types of credit accounts you. For example, mortgages, car loans, traditional credit cards, and even department store credit.
- The age of those accounts.
- Whether you pay your bills on time.
- If there are any collections actions against you.
- How much credit you’re currently using.
Lenders, such as those who might issue you home or auto loans, use your credit score to determine how much of a financial risk you would be. Your credit score helps them predict how likely you’d be to repay your loans, and make payments on time.
The higher your credit score, the more likely lenders are to trust you.
Using Credit Reports and Scores
First, understand that the FCRA also allows other people to order copies of your report.
That means a variety of people can look at your credit history before deciding to get involved with you financially:
- Potential employers.
- Utility companies.
- Insurance companies, including auto insurance providers.
- Studen loan lenders.
- Creditors, such as credit card companies.
- Cell phone service providers, including companies offering data plans for other mobile devices.
However, you can access your credit report and score, too, for your own reasons.
Check Your Credit History and Credit Score
There are plenty of reasons to order your own credit report.
For example, your credit history allows you to:
- Keep tabs and make sure the information is accurate.
- Check to see if the report reflects a loan or credit card you paid off.
- Find out who has accessed your credit report.
- Protect yourself against identity theft.
- Find out your credit score and the factors that are working for and against you before you apply for a loan or a credit line.
You can also use this information to improve your credit history and score. For example, you can find out which lines of credit your behind on, pay them, then see if the creditor will remove them.
Ordering a Credit Report: “The Big 3”
Plenty of businesses offer credit report services, but understand that most of these are third-party businesses. These businesses can order a credit report for you, but they’re not actual credit reporting agencies.
In America, there are three main credit reporting agencies from which all dependable credit reports come:
You can order your credit report directly from one of those agencies, or you can choose a third-party company to order your report for you.
Free Credit Reports
The FCRA requires each of the “Big 3” to provide you with one free copy of your credit report every 12 months in relation to certain circumstances (for example, if there’s a credit denial, you’re moving from unemployment to the job market, or you receive welfare benefits).
Know that if you choose a third-party company to order your credit report for you, the United States Federal Trade Commission approves only one such company and that is Annual Credit Report.
This doesn’t necessarily mean other companies are bunk, but it does mean they might engage in practices (such as asking you to enroll in trial periods for certain programs or products) that the FTC doesn’t endorse.
Visit the FTC’s Free Credit Reports for specific information about the FTC’s stance on credit reports.