If you’ve ever applied for financing, it’s likely that the lender asked your permission to pull your credit report. Or maybe you are just getting started in the world of credit, and you’re wondering, “What is a credit report?”
A credit report is a record of your credit history and other data that’s reported to and compiled by credit bureaus. It’s an important document and the key to being able to do things such as finance a car or get a credit card.
Keep reading to find out everything you need to know — from what’s on your credit report to how credit reports affect your credit scores.
What’s on your credit report?
If you’ve never looked at your credit report before, the amount of information it has can be mind-boggling. But once you know what you’re looking at, it becomes more clear. Here’s a quick rundown of the different types of information you’ll see when looking at your report:
- Your name and any variations of it
- Current and previous addresses
- Employer information
- Credit card accounts
- Unsecured and installment loans
- Closed accounts
- Payment history
- Credit inquiries
- Accounts in collection
- Public records
What purpose does your credit report serve?
Lenders and other entities use your credit report for various purposes. For example, when you apply for a loan or credit, lenders check out your credit report to decide if they want to loan you money and at what interest rate.
Also, your current creditors might take a peek at your credit report to see if you continue to meet their terms. Other entities or individuals might use your credit report to help them decide whether to provide you with cell phone service, rent a home to you or offer you insurance coverage.
How many credit reports do you have?
Credit reports are generated by the three major credit bureaus — Equifax, Experian and TransUnion. So everyone that uses credit usually has three different credit reports. Keep in mind that each bureau might have different information on you: Some creditors and lenders report to all three bureaus, and some don’t.
Where does the information come from?
The important details about your credit come from a variety of places. Take a look at some of the sources:
- Banks or loan companies
- Credit card issuers
- Auto finance companies
- Mortgage providers
- Court records
Who has access to my credit report?
The short answer is that any individual or entity with a legitimate business-related need can likely access your credit report. Here’s a list of companies and people who might be able to look at your credit:
Creditors
Both current and potential creditors can check out your credit to reassess your current terms or determine what kind of credit offer to make. Creditors include credit card issuers and auto finance companies.
Banks
If you’re interested in opening a new account, the bank or credit union might require a credit check for approval. People who don’t have good credit theoretically pose a greater risk of overdrawing accounts.
Another reason a bank might want to take a look at your credit is if you opt-in for overdraft protection — which can be linked to a line of credit.
Property Management Companies
If you apply to rent a home or apartment, the property management company may ask to pull your credit to see if you have a history of making on-time payments.
Insurance Companies
Statistics show that people with bad credit are more likely to file insurance claims. When you apply for insurance, the company might want to look at your credit as a condition of approval and to determine the rates it will offer you.
Utility Companies
Phone and electricity providers might pull your credit to determine your risk level before providing or denying service. A lot of states prohibit companies from denying service to consumers with poor credit, so the company might protect itself by charging a deposit.
Others
Other people or entities who have access to your credit report include employers, with your written consent; as well as collection agencies, government agencies and anyone who gets a court order.
Your credit reporting rights/laws
As part of the Fair Credit Reporting Act, certain credit reporting rights and laws exist to protect you. In addition, some states may have laws, which may offer additional protections.
For example, access to your credit report is limited without your consent. Plus, if you are denied for employment, credit or insurance, the entity denying you must tell you why and give you the contact information of the credit bureau that provided the information.
You also have the right to see your credit reports— in some cases, without a fee. Additionally, if you find any incomplete or inaccurate information, you have the right to dispute the errors. Credit bureaus must correct or delete any information in error.
You may also choose to limit unsolicited pre-screened credit offers based on information in your credit report.
Here’s some more information about your rights under the Fair Credit Reporting Act:
How often should I check my credit?
Some sources recommend checking your credit reports at least once a year, but a lot can change with your credit in 12 months. Consider signing up with a product that provides you with regular information about your credit reports and scores.
After all, good credit is the key to money-saving opportunities in the form of competitive financing offers.
Reviewing your credit report
Because lenders and others pull your credit report to find out what type of a credit risk you are, it’s important that you review your credit report for accuracy. Look for accounts listed on your report that don’t belong to you. Also make note of any incorrect payment statuses, balances or credit limits.
Each credit-reporting company has information on its website about how to interpret the codes you’ll find on your credit reports, such as UP CL, which stands for unpaid collection.
How your credit reports affect your credit scores
You already know that your credit reports from each credit bureau are probably going to contain different information — information that is used to calculate your credit scores. The missing or additional information in each report could be helpful or harmful to your credit.
So it stands to reason that if credit reports with varying information are used to calculate your different credit scores, each score might be slightly or even dramatically different than the others.
Where should I go from here?
Your credit report is an important piece of your financial picture. If you don’t keep on top of it, your credit and scores could suffer. Are you checking your reports and scores more often than once a year? Let us know in the comments.
