Why Is My Credit Report Important?
Your credit report is a detailed look at your credit habits, the types of debt you have outstanding, and is the basis for your credit score. Simply put, it's a complete picture of your credit.
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What Is A Credit Report?
A credit report is a summary of your financial history. Creditors and lenders check your credit report to decide whether or not to extend you credit — and at what rates. Your credit report is an important tool to manage well because creditors and lenders use the information in it, such as your payment history and the number of active credit accounts (known as “tradelines”), to evaluate your creditworthiness.
Your Equifax consumer credit report includes four main types of information:
This section of your credit report includes personal information, such as your full name, address, Social Security number and date of birth, and it may also include your employment information. This personal information helps creditors and lenders ensure that all of the credit accounts listed in your credit report actually belong to you, and not to another person with the same name. Your identifying information, however, is not used to calculate your credit score or determine your creditworthiness.
Your credit report lists the credit accounts or tradelines that you have established with lenders. Each credit account will include information on what type of account it is (credit card, mortgage or auto loan, for example), the date you opened the account, your credit limit or loan amount, the account balance and your payment history.
This section of your credit report includes information about the companies that have pulled a copy of your credit report, known as an “inquiry”. There are two types of inquiries that you may find listed in your credit report: “soft” inquiries and “hard” inquiries. A soft inquiry is made when a credit card company offers you a preapproved credit card, one that you did not apply for. A hard inquiry is triggered when a creditor with whom you have specifically applied for credit pulls a copy of your credit report.
In general, inquiries remain on your credit report for two years, but soft inquiries do not connote positive or negative information. In other words, they don’t factor into your credit score one way or another. Hard inquiries, where you’ve asked a creditor or lender to evaluate you as a prospective borrower, do factor into your credit score, which is why you should be thoughtful about applying for new credit.
Public record information, such as judgments, tax liens, short sales, foreclosures, and bankruptcies, are also listed in your credit report. Past-due accounts that have been turned over to a collection agency, including accounts with doctors, hospitals and cable companies, could also be included in your credit report. In some communities, unpaid library fines and parking tickets may be turned over to collection agencies and show up on your credit report.
Pull a copy of your credit report to familiarize yourself with the personal and financial information it contains. You are entitled to one free credit report from each of the three national credit reporting bureaus once a year. You can get your free credit reports online through annualcreditreport.com.
How Does Information Get On
My Credit Report?
The three national credit reporting bureaus (Equifax, Experian and TransUnion) maintain a history of your credit activity.
The credit bureaus get their information from credit card companies, banks, retailers, mortgage companies and other lenders that have granted you credit, and then each of the bureaus compiles the information into your consumer credit report. Information from public records and collection agencies is also reported to the credit reporting bureaus and then listed in your credit report.
…some creditors report
their information only to one
of the three bureaus, while
others do no report to any.
When you check your credit report from each of the three national credit reporting bureaus, you may find that some of your credit accounts aren’t listed on each individual report. This is because not all creditors report their data to all three credit reporting bureaus – some creditors report their information only to one of the three bureaus, while others do not report to any.
This is why it’s important to check your credit report maintained by Equifax, Experian and TransUnion – the information might be slightly different. The easiest way to do this is to buy a 3-in-1 credit report.
How Often is My Credit Report Updated?
Your credit report is updated regularly, sometimes daily, as your creditors and lenders report the status of your accounts to the credit reporting bureaus. Your creditors will report whether you paid on time (or “as agreed”) or late, and how late your payments were. They will also report how much of your total credit line is being used.
If you regularly make on-time payments and fulfill the terms of your payment agreement, that positive information will be listed on your credit report and help raise your credit score.
If you make late payments or miss payments altogether, that negative information will also be listed on your credit report and will be a negative factor when calculating your credit score.
Your credit report is updated
regularly, sometimes daily…
How Long Do Late Payments
and Other Negative Information
Stay on My Credit Report?
Fortunately, there are set timeframes for how long different types of negative information can remain on your credit report. Late payments stay on your credit report for approximately seven years, for example, as do most other types of negative information, including judgments and paid tax liens. Bankruptcies, however, can stay on your credit report for up to 10 years.
Positive information generally remains on your credit report for a longer period of time and can therefore help to improve your creditworthiness and boost your credit score.
Positive information generally
remains on your credit report
for a longer period of time…
In general, credit accounts that you have paid as agreed will stay on your credit report for up to 10 years. If you have a revolving credit account, such as a credit card, that has been paid as agreed, it can stay on your credit report forever – as long as you keep the account open.
Regularly check your credit report to ensure that negative information falls off after the appropriate amount of time has elapsed. You can order one free credit report from each of the three national credit reporting bureaus once a year. You can get your free credit reports online through annualcreditreport.com.
How Do I Ensure My Credit Report is Accurate?
Erroneous information could wind up in your credit report if a creditor mistakenly reports inaccurate account information, or if you’ve become a victim of identity theft or fraud. Any inaccurate information in your credit report could lower your credit score and change the way lenders evaluate you. Before you apply for new credit, you’ll want to make sure your credit report is accurate and up to date so you can qualify for the best terms and lowest interest rate.
To ensure that your personal and financial information is accurate, check your credit report. You can order one free copy of your credit report from each of the three national credit reporting bureaus every year. You can get your free credit reports online through annualcreditreport.com.
Once you’ve pulled a copy of your consumer credit report, carefully comb through it for any errors or outdated information. As you search through your credit report, make sure that:
- Your personal information, such as your name and address, is correct;
- All of your credit accounts are listed;
- You recognize each credit account listed;
- Your payment history is correct for each account;
- The balances and account age (the date the account was opened) are correct for each of your accounts;
- Inactive accounts have remained inactive. They shouldn’t show new activity;
- All hard inquiries are for credit accounts that you have applied for;
- All negative information, such as late payments, bankruptcies, liens and judgments, has fallen off of your credit report after the appropriate amount of time has elapsed;
How Can I Dispute Errors On
My Credit Report?
If you do spot an error in your credit report, you can file a free dispute with each of the credit reporting bureaus. You can file a dispute with Equifax either online, by phone or by mail. By law, Equifax is required to investigate your dispute within 30 to 45 days and inform you of the outcome. If you file your dispute by mail, you will be notified of the outcome by mail. If you file your dispute online, you will receive email updates throughout the investigation.
If you do spot an error in
your credit report, you
can file a free dispute
After your dispute has been investigated, Equifax will either update the status of the disputed information (this may include informing you that the creditor verified the information it was reporting was correct) or delete the disputed item from your file. If the creditor confirms that the disputed information is correct and will remain in your credit report, you have the option to add a statement of explanation to your file, free of charge, in order to explain the nature of your dispute.
If you find inaccurate information in your Equifax credit report, you should consider ordering a copy of your credit report from the other two credit reporting bureaus to see if they are reporting the same mistake. If you correct an error through Equifax’s dispute process, the other two bureaus should eventually receive the corrected information.
To correct the error quicker, though, consider contacting the other two credit reporting bureaus directly to dispute the inaccurate information. You can also contact your creditor to dispute a credit report error.
In order to build a strong credit report and improve your credit score, get in the habit of regularly checking your credit report so you can catch any errors that could affect your credit score.
Who is Allowed to See My Credit Report?
The Fair Credit Reporting Act (FCRA) governs who can access your credit report. In Section 604, under Permissible Purposes of Consumer Credit Reports, the FCRA lists the ways your credit report might be accessed:
- Court order or subpoena in conjunction with a Federal grand jury
- Consumer request: you directed in writing that a person be allowed to see it
- Credit application: you have applied for credit with a creditor or lender
- Preapproved credit offers from creditors and lenders
- Insurance coverage evaluation
- Prospective employers
- Government licensing body or agency
- Potential investor
- Family court, to determine child or family support
- Other legitimate business interests
It’s important to understand that when you fill out an application for credit, like a car loan, mortgage or credit card, you are giving permission to that creditor or lender to pull a copy of your credit report and evaluate your creditworthiness as a borrower. This is known in the industry as a “hard” pull on your credit.
But creditors and lenders may also decide to look at your credit report in order to extend a preapproved credit opportunity without you filling out an application. This is known in the industry as a “soft” pull on your credit.
How Can I Get My Free Credit Report?
You are entitled to one free credit report from each of the three national credit reporting bureaus every year. You can get your free credit report online by visiting annualcreditreport.com. For a small fee, you can also access your credit score.