What Is A Credit Report and Why It Is Vital to Your Future
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Think back to when you were in school… Whether it was elementary school or college, you received a report card at the end of every term. It was a list of the classes you took plus a grade that reflected your participation and mastery (or lack thereof) in each course.
As adults, we don’t have to worry about the dreaded report card day. But we do have a report card of sorts. One many people forget about. Some don’t even realize that this exists. It’s your credit report. Actually, you have not one — but three — credit reports which are a summary and reflection of your use of credit.
So what exactly is on your credit report? Why does it matter? How do you get a copy of your credit report? And will your mom have access to it? Read on to find out.
Spoiler alert: Technically your mom could access it but that would be an invasion of your privacy. And you’re under no obligation to share your credit report with her. Unless you really want to. Your decision!
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What is a credit report?
A credit report is a collection of your financial data that banks, mortgage lenders, credit card companies report to a credit bureau. Every on-time payment, past due payment, and even bankruptcy is reported to the credit bureaus and listed on your report.
In the United States, there are three major credit bureaus — Equifax, Experian, and TransUnion — therefore, you have three credit reports. Don’t assume, however, that all three of your credit reports are exact replicas of each other. There are two reasons why they may vary to some degree.
First, most lenders will report data to all three bureaus, but some might only report to one or two. It’s not unusual for a smaller company to just report to one bureau in an effort to save time on paperwork.
Your Discover credit card payment and Navy Federal mortgage will likely be reported to all three credit bureaus. But the auto loan that’s financed through Sam’s Car Lot may be reported to just one credit reporting bureau.
The other reason why your credit reports may not be the same is because of identity theft or human error. In cases of ID theft, you could discover that the new credit accounts the person opened were only reported to one or two bureaus. Finally, human error is always possible. It’s rare, but it does happen. People transpose letters and numbers or add an initial or extra letter.
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What’s included in your credit report
Each of your free credit reports will look a bit different in formatting, but there are five categories of information that you’ll find on each report.
Personal information
This section includes your personal data that are associated with your financial accounts. You may find, as I did, my college address from over a decade ago. My report also included my parents’ address since I still lived there when I opened my very first credit card account.
Other personal information that you’ll find on your credit report includes:
- Your name (may include other versions of your surname if you’ve changed it)
- All addresses you’ve used
- Your date of birth
- Your Social Security Number
- Any phone numbers you’ve used
Your credit accounts
This section shows account information including the financial institution, your payment history, your account balances, and the status of your account. Late payments are noted in this section.
The first time I checked my credit reports, I was surprised that they showed accounts that were closed years ago. Accounts I’d long forgotten. They remain on your credit report for 10 years. You can see the month and year when the account will be removed from your credit reports.
For each credit account that’s on file, you’ll see information including your
- Account name
- Account number
- Current balance
- Most recent payment amount
- Type of account
- Information about late payments
- Credit limit
- Highest balance
Your public records
The public records area may be blank, and that’s a good thing since this would include negative information about your credit history including:
- Judgments
Inquires
This section is where you can see how many hard inquiries and soft inquiries have been run, along with the dates.
- Hard credit inquiries stay on your credit report for two years and have less of an impact after one year.
- Soft credit inquiries also stay on your report for two years but have no impact on your
I found this section a bit confusing in that it can be hard to tell which company did the inquiry. A name is listed, but some were abbreviated and took some time to figure out. Those were accounts that were closed years ago, and I’d forgotten about the account.
Collections information
Unless you’ve had an account in collections within the last seven years, you won’t find any information in this section. You will be able to see the creditor and their contact information for each listing. You can also see the dates and the amount of money that’s in collections.
What are credit reports used for?
Your credit report is used by lenders and financial institutions to determine whether they’ll issue you a loan or credit. The data that’s on the credit reports is also what’s used to create your FICO score. When a mortgage company does a credit check, they can see everything that’s on your credit report.
Ideally, you won’t have too many accounts as well as a mix of revolving credit (credit cards) and installment loans (a car or house payment). Using too much of your available credit isn’t good, but not using any credit can cause you to have a low credit score.
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Credit reporting agencies in the United States
There are three credit reporting companies, or bureaus, in the USA. Each one should have data on if you’ve used financial products like credit cards, student loans, mortgages, or other types of credit.
Equifax
Dating back to 1899, Equifax has evolved over the centuries and now operates in 24 counties. Besides curating credit data for potential lenders, Equifax offers consumer-facing products. You can get credit fraud protection and identity theft protection for individuals or families. These products include monthly access to all three credit reports as well as fraud alerts.
TransUnion
Back in the early days of credit reporting, TransUnion served the central United States. Now a global company, they have data on over one billion people and operate in more than 30 counties. They offer credit monitoring services for consumers for a monthly fee. If you feel you’ve been a victim of ID theft, start with freezing your credit report with TransUnion. They’ll automatically freeze it with Experian and Equifax.
Experian
With the oldest history of the three companies, Experian has its roots in 19th century London. Business people would share information about delinquent account holders and formed the Manchester Guardian Society in 1826. Today Experian is in 45 countries with a major presence in the USA. Like their competitors, they offer monthly subscriptions so you can monitor your credit.
How to get a free credit report
Thanks to the Fair Credit Reporting Act, every person is eligible for one free credit report per year from each of the three credit bureaus.
The easiest way to get your free credit reports is by going to AnnualCreditReport.com. It’s a quick and easy process that takes less than five minutes to access each report. It seems that you can autosave your name and address, but you may need to enter your Social Security Number for each report.
To access your credit report, you’ll need to provide the following information:
- Legal name
- Current address
- Past addresses (if you’ve moved within the last two years)
- Social Security Number
- Date of birth
On the next page, you’ll need to select which report you want to access. It will take a minute to load, so be patient.
Once you have your credit report, you can print it or save it to your computer. It may be long (mine were 18-22 pages each) so you probably don’t want to print it out unless necessary.
How to handle a mistake on your credit report
Data from the Federal Trade Commission shows that one in five people have an error on their credit reports. This could be due to human error; it’s easy to transpose a number in someone’s SSN or misspell a name. Or you could be the victim of identity theft. Either way, you don’t want incorrect information reflected in your FICO score or being used to determine whether or not you can get new credit accounts.
The Consumer Financial Protection Bureau has detailed directions on what to do if you find an error on your credit report. You will need to write a letter outlining the issue and send it to the reporting bureau that has the wrong information. It’s suggested that you mail it via certified mail with a return receipt requested. This will prove that they received it and begin a paper trail that you can follow up on if you don’t receive a response within 30 days.
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FAQ
Do I need to get a copy of all three credit reports?
Yes, it’s a good idea to get a free copy of your credit report each year. You can request them all at once. Alternatively, request one every four months, so you can monitor your reports year-round. As of this writing, you can receive all three reports weekly.
What do I do if I find an error on my credit report?
Contact the credit reporting bureau that has the mistake and request that the incorrect information be removed.
Why isn’t my spouse’s credit report the same as mine?
Each person's credit report reflects the financial accounts which are in their name. If you and your wife have a joint credit card, the information on both reports should be identical. However if your auto loan is only in your name, it won’t appear on your wife’s credit report.
The bottom line
While the term itself can sound intimidating, the premise behind a credit report is simple. It’s a history of your finances that involves credit. Obtaining your credit report and understanding what it says is simple and doesn’t take much time.
As of March 2022, you can still get free weekly reports from all three credit reporting bureaus. However, when the temporary service goes back to allowing just one free report a year, choose to get one every four months. Set a calendar reminder for the dates you wish to spend 15 to 30 minutes reviewing. Should you notice any error or suspicious activity, take action on it right away.
Finally, use this as a chance to improve your financial habits. Fix your credit by paying off old debts that are with a collection agency, or having accounts with too many credit card companies are red flags to lenders. Having a good credit report is essential to getting low interest rates on auto loans and mortgages.
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Writer
Charlotte Edwards is an educator-turned-freelance writer based in Beijing, China. She writes personal finance and parenting content for both digital and print publications around the world.
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