What is a Credit Report?
A credit report is a historical overview of your financial health. It includes identifying information (such as your name, address and birthday), account and payment history, your loans, and any relevant public records, such as foreclosures or lawsuits.
Most often, people pulling credit reports are interested in checking in on their accounts because they’re planning to make a big purchase (buying a home or car and sending a kid off to college are common examples). Since what shows up on your credit report affects your ability to get a sizable loan with a decent interest rate, it’s crucial to be aware of your financial status at all times.
What Shows Up On a Credit Report?
What shows up on a credit report falls into four main categories: personal information, account history, credit inquiries, and public records. This allows for lenders to receive a detailed overview of your spending and saving habits, so that they can properly determine how trustworthy you are before offering a loan.
Below is a full list of what you can expect to see when you pull a credit report:
- Full name (including any nicknames you may have used to open other accounts)
- Phone number
- Social Security number
- Employer’s name
- Current and past addresses
- Open and closed accounts
- Account types (including revolving accounts, such as credit cards, and non-revolving accounts, such as loans)
- Payment history
- Credit limit
- Creditor name
- Credit and loan applications
- Credit report inquiries (both hard and soft)
- Companies that have accessed your report
- Bankruptcy and foreclosures
- Judgments and lawsuits
- Tax liens
There are a few things that don’t show up on your credit report. This includes your salary, savings and any on-time rent and utility payments. However, if you’re late on these payments and they get sent to a collections agency, they may show up as unpaid debt on your credit report.
When Should I Get a Credit Report?
Everyone should pull a credit report on a yearly basis to make sure they understand how their finances are being viewed by lenders and credit bureaus. In addition, reports can sometimes include inaccurate information, so checking your report frequently allows you to fix those errors before they impact your credit score and ability to borrow.
If you’re planning on making any big purchases in the coming months, you may want to check on your report more frequently than once a year to ensure you get the best deal on your loan. Most credit bureaus allow you one free credit report a year, so spacing these out over time can help save you money and keep you in the loop on your finances.
Credit Reporting Bureaus
There are three main credit reporting bureaus: Equifax®, TransUnion® and Experian®; they collect and report on your accounts, payment history and debt. Each company allows one free report a year, meaning that you can space each one out by four months to be covered for the entire year.
It’s important to note that each bureau may report slightly differently, leading to some reports missing information that others included. Each bureau collects and displays information on consumers at different times of the year, which can also impact the reporting results. Unfortunately, which bureau your lender uses isn’t up to you, meaning it’s important to check all three for any miscellaneous errors. However, you can rest easy knowing that all three follow the same federal and state regulations.
Why Is a Credit Report Important?
A credit report is important because it helps other companies and lenders determine how trustworthy you are. When applying for a credit card, loan or even a job, your credit report is often pulled during the application process. Ensuring that your report accurately reflects your history of on-time payments and proper credit usage is crucial to landing an offer from a potential employer or a low interest rate on a car loan.
How Does Pulling A Credit Report Affect My Score?
There are two types of credit report inquiries, with varying effects on your overall credit score. Soft inquiries, such as when you view your own report, don’t cause any drops of your FICO score. Hard inquiries, including an inquiry from a third party (such as when you apply for a new credit card or loan) will cause your score to drop slightly and will be noted on the inquiries section of your report.
Credit inquiries have a small effect, if any, on your score. Most estimates say you’ll see a drop of five points or less, though this varies by personal history. Those with less credit history are likely to take a bigger hit from an inquiry, for example. Making multiple inquiries in a short amount of time is also a red flag to credit bureaus, which can cause a significant drop in your score. But as long as you apply for credit or loans only when you really need them, and pay them off on time, pulling a report every now and then is nothing to be concerned about.
Who Can Pull A Credit Report?
Lenders, credit card companies, businesses and individuals can all pull credit reports. Generally speaking, individuals cannot get a credit report for anyone but themselves unless they have permissible purpose. Permissible purpose means that the person pulling a credit report on another has approval to obtain the report because it relates to a transaction or other crediting issue.
Credit reports are a pillar of individual financial success, as they determine how much money you receive (and owe back) at every major stage of your life. To help get your report to a better place (and fix your credit score), we recommend staying up-to-date with yearly inquiries, prioritizing on-time payments and coming up with a plan to reduce debt. By following these steps you can ensure that during your next yearly inquiry, there will be no surprises that put a damper on your future.
from a Credit Expert