A credit report is a detailed statement of your credit history – how you’ve managed your credit accounts and paid off your debts.
Credit reports include key financial information used by lenders, credit card issuers, and insurance companies to determine your creditworthiness. The information in your credit report also determines your credit score.
How do credit reports work?
For the most part, credit reports detail your payment history to creditors over the past seven years. They can include personal information as well as credit inquiries carried out by financial institutions.
Credit reports are issued by the three major credit bureaus: Equifax, Experian, and TransUnion. Bureaus, also known as credit reporting agencies, collect information provided by creditors and lenders regarding accounts you have with them.
If you have declared bankruptcy, your report may go back 10 years instead of the usual seven.
The origins of credit reporting
The roots of modern credit reports can be traced back to the beginning of the 19th century, when a group of London tailors began to compile information on clients who had not paid their debts. In 1826, a newsletter reporting unreliable customers began to circulate in Manchester.
The practice of monitoring consumer credit continued to evolve throughout the 19th and 20th centuries with the establishment of the three credit bureaus:
- Equifax (1899)
- TransUnion (1969)
- Experiential (1996)
How is a credit report generated?
Credit reports are prepared by the credit bureaus. The data for these reports comes from a variety of sources, including banks, lenders, credit card companies, collection agencies, and the government.
Who uses the information on your credit report?
Along with your credit report, agencies collect credit information about debts you owe, your payment history, and more. This data is then provided to businesses, upon request, to help them manage risk and determine your ability to repay debt.
Here are some of the entities that can assess your creditworthiness based on your credit report:
- Mortgage lenders
- Financial institutions
- Insurers / Insurance companies
- Potential owners
What Goes On Your Credit Report
Credit reports contain a wide range of information for the past seven to 10 years, from personal data to data about loans and lines of credit on your behalf. This includes the number of credit accounts in good standing and those, if any, that are overdue.
The Personally Identifiable Information (PII) contained in your report is used to match the data with you.
What’s on your credit report?
Your credit report may contain the following data:
- Personal informations. Full name (current and other form), phone numbers, date of birth, social security number, current and former home address and any employer listed on credit applications.
- Credit accounts. Closed and open (credit card, mortgage, car loan, among others), creditors associated with these accounts, loan amounts, payment history, credit limit, checking account balance and due dates opening and / or closing.
- Public registers. Bankruptcies and foreclosures. As of 2017, tax liens do not appear on credit reports.
- Hard and soft inquiries. These credit checks are usually done by potential lenders or by companies doing a background check. Checking your own credit report can result in a gentle credit investigation.
The difference between credit reports and credit scores
Credit scores can give lenders and creditors an idea of ââyour ability to pay your bills on time and of the risk you pose as a borrower. The information used to calculate your credit score comes from your credit report.
On the other hand, credit reports are the source of your credit score because they show your credit history, payment history, and the current status of your accounts.
Credit report vs credit score
Credit reports and credit scores are often confused. Here are the main differences between them:
|CREDIT REPORT||CREDIT SCORE|
|â¢ A detailed statement of your credit history||â¢ A three-digit number that is usually between 300 and 850|
|â¢ Includes information from all your accounts||â¢ The score represents your creditworthiness|
|â¢ There are three reports, one per credit bureau||â¢ The information on your credit report determines your credit score|
How to read your credit report
Credit reports are generally divided into four sections: Personal Information, Credit Accounts and History, Public Records, and Investigations.
While reports aren’t always easy to read, they give you a better understanding of your credit history and how lenders and credit card issuers use them to assess your creditworthiness.
It bears repeating that your credit score will only be as good as the account information it is based on, so make sure it is correct.
Identify errors on your credit report
A study by the Federal Trade Commission found that 20% of consumers had errors on their credit reports that were corrected after being disputed.
Left unchecked, mistakes can drive up interest rates and reduce your ability to buy a home, refinance your mortgage, apply for a car loan, or even get a job.
And repairing bad credit can take time, even with the help of the best credit repair companies.
When reading your credit report, look for:
- Incorrect late payments
- Addresses you don’t recognize
- Accounts you’ve never opened
- Higher account limits than they should be
- New credit requests that you don’t remember
- Any invoice incorrectly marked as unpaid
Correct mistakes on your credit report
We cover more on this topic in our article on how to remove negative items from your credit report. But in a nutshell, you can file a dispute directly with the office that provided the report.
Federal law requires offices to respond within 30 days of receiving your dispute. You can also file a dispute with the company that provided the negative information.
While some inaccuracies found in your reports may be simple errors, others could indicate that you have been the victim of identity theft. If you suspect this is the case, visit the FTC’s website for fraud reports and request a free fraud alert from one of the three major credit bureaus.
Credit Report FAQs
How can I get a free credit report?
You are entitled to a copy of your credit report, as required by the Fair Credit Reporting Act of 1970. The Consumer Financial Protection Bureau (CFPB) is responsible for enforcing the law.
You can request a free annual credit report from all three credit bureaus at annualcreditreport.com, the only government-approved website for free credit reports.
Due to the pandemic, Equifax, Experian, and TransUnion are offering free weekly credit reports that will remain available until April 2022.
How Long Does Bankruptcy Stay On Your Credit Report?
If you have filed for Chapter 7 bankruptcy, it will show up on your credit report for 10 years.
But if you have filed for a Chapter 13 bankruptcy repayment plan, it will stay on your report for seven years.
How long do late payments stay on your credit report?
A late payment can stay on your credit report for up to seven years from the date of default.
How long do serious claims stay on your credit report?
Serious inquiries can stay on your credit report for up to two years. These inquiries indicate that you have applied for credit and they may affect your credit score.
How to freeze your credit report?
A credit freeze prevents the opening of new accounts in your name. You can freeze your credit with any of the three credit bureaus. Usually, it takes effect almost immediately. In addition, freezing and unlocking your credit is free.
How long do closed accounts stay on your credit report?
A closed account with no history of late payments can stay on your credit report for up to 10 years.
Summary of Money’s Guide to Credit Reports
- Credit reports are detailed accounts of how you’ve handled credit, like loans and credit cards, over the years.
- Credit reports include personal information, details about your credit accounts, information from public records, and credit inquiries.
- Incorrect or outdated items on your credit reports can lower your credit score, so be sure to review your three reports regularly.
- The only government approved website where you can request your free credit reports is AnnualCreditReport.com.