What Is a Credit Report?

The United States is a credit-based economy. It’s nearly impossible to get by without a positive credit history, and to attain that, your credit report plays a major role.

Every adult should know what a credit report is and how to utilize it to improve their finances. If you still don’t fully comprehend credit reports, though, we don’t blame you. It’s not something they teach in school – at least not to the extent that they should. But of course, it’s never too late to learn. If you’re looking to find out more about credit reports, their importance, and how to use them, we put together this guide to help you out.

What Is a Credit Report?

A credit report is a statement that has information about your current credit situation as well as your past credit activity. Among other things, it contains your loan payment history, the current status of your credit accounts, and information from public records, including bankruptcies. Most people have multiple credit reports from the three different credit bureaus – Experian, Equifax, and TransUnion.1

How Your Credit Report Affects Your Credit Score

If your credit score is the final dish, think of your credit report as the ingredients. Your credit score is based on the information in your credit report. Let’s take a closer look at credit scores in general.

What Is a Credit Score?

A credit score is a three-digit number from 300 to 850 that measures how likely someone is to pay back a loan on time. It’s based on a mathematical formula, also known as a scoring model, that uses information from your credit report. Lenders and creditors use your credit score to decide whether to approve you for a credit card, a car loan, a mortgage, or another loan. Different bureaus may assign you slightly different credit scores based on different mathematical formulas. However, 90 percent of lenders use FICO scores,2 which are calculated from the following information:

What do these categories entail, exactly?

• Payment history: Unfortunately, even one missed payment can decrease your credit score, which is why it’s important to pay your debt in a timely manner.
• Owed money: Your credit utilization ratio is calculated by dividing the total revolving credit you use currently over the total of your revolving credit limits; in other words, it means how much of your credit you use. Ideally, use no more than 30 percent of your credit to avoid decreasing your overall credit score.
• Length of credit history: This includes the ages of your oldest and newest accounts plus the average age of all of your accounts. The longer your credit history is, the higher your credit score will be.
• Credit mix: Lenders want to see a diverse credit portfolio comprising different types of accounts. They’ll also count how many of each account type you have.
• New credit: New credit includes how many of your credit accounts you’ve opened recently and how many hard inquiries lenders have made when you’ve applied for credit. If you have too many new accounts or inquiries, that could decrease your score, as it indicates risk.

However, not every account you have will impact your credit score. Here are the two types of credit accounts that can impact your score:

• Installment credit: This means that you borrow a fixed amount that you’ll pay off in monthly installments. Installment credit accounts can include student loans, personal loans, and mortgages.
• Revolving credit: Revolving credit, on the other hand, gives you a fluctuating credit limit that you pay off monthly based on how much credit you use. Revolving credit accounts include credit cards and home equity loans.

Service accounts, such as utility and phone bills, do not impact your credit score unless they get sent to a collection agency.3 So pay off that phone bill before it goes on your report and lowers your credit score!

What Do Credit Reports Include?

Now that you understand what a credit score is, let’s go back to credit reports, which include these elements:

Personal Information

• Your name and any name you’ve used with credit accounts in the past, including nicknames
• Current and former address
• Birthdate
• Social Security number
• Phone numbers

Credit Accounts

• Current and past credit accounts and their types
• Credit limits or amounts
• Account balances and payment history
• Dates that accounts were opened or closed
• Credit names

Collection Items

• Debts handed over to third-party collection agencies

Public Records

• Liens
• Foreclosures
• Bankruptcies
• Civil suits or judgments
• Information on overdue child support, either gathered from a state or local child support agency or verified by local, state, or federal government agencies

Inquiries

• Companies that have accessed your credit report in a hard inquiry, also known as a hard pull.4

How Do Credit Reports Work?

When you apply for a loan, credit card, or retail store offer, credit reports act as a system of checks that help lenders make quick and informed decisions about your creditworthiness. Every 30 days, creditors and lenders release your credit activity to the three credit bureaus, which input this into your credit report and thus your credit score. From there, the credit bureaus provide this information to creditors and lenders, continuing the cycle of credit reporting.5

Why Is Your Credit Report Important?

Your credit report is important because it can impact whether you get loans as well as your interest rates on loans. It can also determine whether you get insurance, housing, cable TV, cell service, internet, or utility accounts. Some employers use credit reports to make their employment decisions as well. In sum, credit reports can have a huge impact on your life, whether you like it or not.

When Should You Get a Credit Report?

We strongly recommend getting your credit report regularly, but the interval varies depending on your unique situation. For example, if you’ve placed a freeze (more on this later) on your account, checking your credit report every quarter to every year should be enough. But if you don’t have a credit freeze in place, we recommend getting a credit report once a month.

Credit reports aren’t always 100-percent accurate. Businesses that report credit information can make mistakes, and the sooner you catch those mistakes, the sooner you can dispute them so they don’t go to your permanent records.

You should also check your credit report:

• Before you make any major purchases that may require a loan, like a house or car
• Before you apply for a new job
• To guard against identity theft

Our recommendation that you get a credit report at least every month comes after the three credit bureaus permanently gave everyone free weekly credit reports. Up until the first half of 2020, they provided only one free credit report per year. They temporarily launched the “one free report per week” program during the lockdowns in 2020, and after extending it twice, the program is now permanent. It’s a great provision that we should take advantage of to improve our credit.

• Receive a notice that you were denied credit, employment, or insurance, or incurred another “adverse action” due to your credit report
• Think your credit report is inaccurate because of fraud
• Put out a fraud alert or extended fraud alert on your credit report
• Are unemployed and want to apply for jobs
• Receive public welfare

Your state may have different legislation regarding free credit reports as well.

How To Get a Copy of Your Credit Report

You can get a copy of your credit report in a few different ways:

1. Go online to AnnualCreditReport.com.
2. Call 877-322-8228.
3. Fill out the Annual Credit Report request form and send it to the Annual Credit Report Request Service at this address:
   • Annual Credit Report Request Service
     P.O. Box 105281
     Atlanta, GA 30348-52816

What To Look For in a Credit Report

Once you get your credit report through any of the above methods, check for:

• Timeliness: All of your information should be up to date, as this report is updated with new information every 30 days.
• Errors: Look for any information that’s not accurate (more about common credit report errors and how to fix them below).

Why Doesn’t My Free Credit Report Include Credit Scores?

Surprisingly, your free credit report doesn’t include credit scores; you’ll have to get them either from credit card companies or from some credit bureaus and scoring companies.7

What Makes a Credit Score Go Up or Down?

Since your credit score can have a huge impact on your major life decisions and opportunities, here’s how to increase it — and what actions will have the opposite effect.

How Does Info Get in My Credit Report?

Lenders and creditors provide your credit activity to credit reporting agencies, which use it to create credit reports and calculate your credit score. The new information goes to the agencies once every 30 days, keeping your credit report and score up to date.

Why Should I Want a Copy of My Credit Report?

It’s necessary to get a copy of your credit report to check that the information on it is up to date and accurate. That way, you won’t be surprised when you apply for a loan, interview for a job, or buy insurance. Checking your credit report also helps you guard against identity theft,9 which is especially important if you lose your Social Security card or are involved in a data breach. Read more about what identity theft is, how to check if someone is using your identity, and how to report fraud if you find fraudulent information on your credit report.

What if I Find Errors in My Credit Report?

Looking at your credit report, you may see inaccurate information, which you can correct for free either online10 or by calling 855-411-2372 or the credit bureau that sent you the report. You can also send a form to these bureaus if you prefer.

Common Errors

Everybody makes mistakes, and credit bureaus are no exception. Here’s a list of common types of errors on consumers’ credit reports.

• Identity: This could be a wrong name, a wrong phone number or address, fraudulent accounts as a result of identity theft, or information from someone with the same or a similar name (in that case, it’s called a mixed file).
• Account status: Closed accounts could be reported as open; you could be reported as an account owner instead of an authorized user; accounts could be reported as late or delinquent incorrectly; dates of payments could be wrong, or the same debt may be listed more than once under multiple names.
• Data management: Frustratingly, incorrect information could be reinserted after it was corrected, and accounts might appear multiple times with different creditors listed.
• Balance errors: Accounts may show false current balances and credit limits.

What if I Can’t Get Errors Corrected?

Just as you won’t be able to get all your personal information deleted from Google, if the furnishers who provided the information think the information is accurate, then it will stay on your credit report. However, you can request a statement explaining the dispute to remain in your credit file and be included in future credit reports.

How Long Can Credit Bureaus Report Negative Information?

Baggage can be literal, psychological, and financial in the form of negative information on your credit report. Maybe it’s an old Banana Republic store card that you forgot to pay off, or maybe you have a ton of college debt that’s compounded over the years. Well, just as bad luck lasts for seven years when you break a mirror, most negative information will remain on your credit report for seven years.

There are exceptions to this seven-year rule, however. For example, bankruptcies can stay on your credit report for a decade. If you’ve had any lawsuits or judgments against you, the information will remain on your credit report for the length of the statute of limitations (if it’s longer than seven years). And even when negative information is removed from your credit report, the credit bureaus will still keep this information on file.

What does that mean for you? Well, if you apply for a job that pays $75,000 a year or more, or for more than $150,000 worth of credit or life insurance, credit bureaus may report the negative information to the potential insurers, employers, creditors, or lenders (oh my). Worse, there’s no way to totally remove this information from the bureaus’ files if it’s accurate. Sigh.

Can I Explain the Negative Information?

Have we bummed you out? Don’t shoot the messenger! There is one ray of hope for the negative information in your credit report: You can include an explanation of no more than 100 words that details any circumstances that led to this issue, like an illness or the loss of a job.11 While you can’t erase the past, at least you can explain it and hope that someone will listen.

Who Can See My Credit Report?

According to the Fair Credit Reporting Act (FCRA), the following groups can see your credit report:

• Potential employers
• Credit reporting agencies
• Potential lenders
• Credit or insurance companies that will be providing services mainly for personal, household, or family purposes
• Government agencies determining eligibility for licenses
• Executive departments and agencies issuing government-sponsored travel charge cards
• Child support enforcement agencies

This isn’t a complete list, however. To see everyone who can get a copy of your credit report, go to Section 604 of the FCRA.12

How Is My Credit Report Affected When My Spouse Dies?

When your spouse dies, does their debt die with them? That depends on whether you live in a community property state, which uses the “common law” system of property ownership. If you live in a community property state, then you’ll be responsible for your deceased spouse’s debt. The following are community property states:

• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Washington
• Wisconsin
• Texas13

If you don’t live in any of the above states, then you won’t be responsible for any loans or cards in your deceased spouse’s name, even if you were an authorized user or secondary account holder. Rather, you’ll only be responsible for joint accounts, which could impact your credit report and thus your credit score.

How To Report Deaths

Unfortunately, the grieving process includes red tape. If your spouse dies, you’ll need to tell the credit bureaus directly. While the U.S. Social Security Administration provides the bureaus with death information periodically, you’ll want to get that information over to them as soon as possible. Once the credit bureaus are aware of your spouse’s death, they will flag their credit history to remove your spouse from preapproved credit offer mailing lists. To contact the agencies, call 1-888-567-8688.

Next, you’ll request a copy of your spouse’s and your credit reports so you can list which credit lines were joint and separate. Then, contact your spouse’s creditors to tell them of the death, providing a death certificate as well as your state’s contact information.14 While these are certainly not fun tasks, if you don’t live in a community property state, at least your spouse’s separate debts will pass away with them.

What Is a Credit Freeze?

Even if you attempted to protect yourself from identity theft with the best identity theft protection software, identity theft can still happen to you. If it does, you might want to consider freezing your credit, which limits access to your credit report. This will prevent people from using your personally identifiable information (PII) to take out loans or open new accounts. Creditors won’t be able to access your credit report, making them less likely to give out loans or credit to someone using your identity. Keep the credit freeze in place as long as your PII is at risk. Here’s how to request credit freezes from the three major credit bureaus:

Medical History Reports

A medical history report, not to be confused with a credit report, is a summary of your medical conditions. Just as lenders use credit reports to determine if they should give you loans, insurance companies use medical history reports to decide whether to insure you.15 Medical bills technically can get on your credit report, but only if they’ve been unpaid for 180 days or more, so in general, medical history reports and credit reports are separate entities.16

Recap

If you want to buy your dream home, purchase a car, or sign up for a new credit card, your credit report matters, as it determines your credit score. It’s a sad truth that your credit will follow you around wherever you go, which is why checking your credit report at least once a month is essential. But don’t lose all hope; even if there’s negative information on your report, it’ll most likely be deleted within seven years. To learn more about credit reports, continue on to our FAQs section.