What is a Credit Report?

Who has your credit information and where do they get it?

The companies that collect your credit history are called credit bureaus. There are three big ones: Equifax, Experian, and TransUnion, and several smaller agencies that also collect different types of consumer information. By law, you are entitled to a free credit report every 12 months from each credit bureau, including those lesser known. But according to a financial habits poll 54% of Americans don’t check their credit scores.

So, where do the bureaus get their information? From creditors. A creditor can be any company that lends money or extends credit. Banks, credit card issuers, utility services and auto finance companies are all creditors. No law requires lenders to report information about your bill-paying habits. However, if information is shared and included on your credit reports, the Fair Credit Reporting Act (FCRA) requires for it to be accurate., Making a loan can be risky for a lender. They never know for sure if a borrower is going to pay them back. It doesn't matter how airtight the loan agreement is with a borrower.  The information on a credit report can help them determine how risky a borrower might be.

Different Credit Bureau, Different Report

Each credit bureau gets its information from different sources. One credit bureau won't have exactly the same information about you as another. 

Besides your credit history, each credit bureau creates a credit score. A credit score is a statistical number that ranks a person’s credit worthiness, based on their credit history. It compares your estimated risk as a borrower with everyone else's. Each credit bureau comes up with its own score, using its own formula. Information about you from their records goes into their formula to calculate their score.

When you apply for credit, the lender will ask one of the bureaus for its credit report and score for you. 

Credit bureaus are rewriting your history all the time. They're always getting new information about you from creditors you're doing business with. Every time you pay (or don’t pay!) a credit card bill, in it goes. Change your home address? Bureaus will add it to your history.

You can use this constant flow of information as an opportunity. You can make your accumulated history – whether good or bad today – better tomorrow. Yet a recent survey shows 37% of Americans have no idea how their credit score is determined.

In addition to getting a credit report, at no cost, annually, you’re also entitled to a free credit report if a company takes “adverse action” against you. That includes denying your application for credit, insurance, or employment. If this happens, you have to ask for your report from the credit bureau that provided the data within 60 days of receiving notice of the action, from the credit bureau that provided the data. You’re also entitled to one free report a year if: 

  • You're unemployed and plan to look for a job within 60 days
  • You’re on welfare 
  • Your report is inaccurate because of fraud, including identity theft

What’s Actually Included in a Credit Report?

In short, a credit report shows the details of your financial history and how you have managed credit in the past. There are typically four categories of information included:

Personal Information

This includes things like your name, including names you may have used in the past, address and social security number and employment information.

Credit Inquiries

Recent applications for credit are included and stay on your report for 24 months, regardless of whether your application was approved.

Credit Accounts

Any type of installment loan or revolving credit will appear, including payment history. Details can include the date the account was opened, your credit limit or loan amount and your account balance.

Public Records

Credit bureaus also get information from state and county courts. This can include things such as foreclosures, bankruptcies and repossessions.

Remember that mistakes can happen, and you should always verify the information shown on your credit report. If you do find an error, you can report it to both the credit bureau and the company that provided the information. Credit reporting agencies are required to review your dispute and report the results back to you within 30 days.

Does Checking Your Numbers Hurt Your Credit Score?

When you check your own credit, that is called a soft inquiry. This is a basic review of your lines of credit and payment history, and this type of inquiry does not affect your credit score. Soft credit checks can also be pulled without your permission and can happen when a business checks your credit to pre-approve you for an offer or other promotional purpose.

Your consent is required for a hard inquiry, which is triggered when you apply for credit. These inquiries become a part of your credit report and anyone who pulls your credit can see them. A hard inquiry stays on your credit report for up to two years and can have a negative impact on your credit score. Too many inquiries can signal high risk to lenders.

In general inquiries have a short shelf life, compared to the other types of information on your credit report. Keep your focus on making sure your credit usage isn’t too high and paying all of your bills on time. Those elements have the biggest impact on your credit.

Whether you have a lengthy credit history, or are just getting started, understanding what information is utilized to create your credit report and when it gets accessed should be a priority. Your credit report can be used to make decisions about your financial future. It’s worth the effort to make sure the information included is accurate.

Disclaimer: The material presented here is for informational purposes only and does not represent specific financial advice to you or your circumstances personally.
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