Everything You Need to Know About Credit Reports
You’ve probably heard about it when you tried to rent an apartment, buy a house, or even get a job – “We’ll just need to check your credit report.” But what is your credit report? And how can you keep it in good shape?
Your credit report is a comprehensive history of your financial past and includes everything a potential lender would want to know about you. It lists all credit card accounts or loans you’ve had, details the balances of those accounts, and shows how frequently you made payments in the past. Lenders always want to know: did anyone take action against you for unpaid bills in the past? Were you late in making your monthly credit card payments? Did you pay the late fees? Your credit report can show them all of this information and more.
Credit reports include identifying information such as your current and former addresses, your social security number, your current and past employers, and your year of birth. They list credit information including the accounts you have with banks, utility companies, mortgages, student loans, leases on apartments, your credit limits or loan amounts, and your payment patterns. They detail any public information such as bankruptcies and they specify the names of people or organizations that obtained copies to check your credit report in the past two years.
Why Your Credit Report Matters
Your credit report can be checked by five important groups: employers, lenders, insurers, landlords, and government agencies. You should review your credit report often to ensure the information it contains is accurate and current. By checking your credit report, you can also identify any suspicious activity that could lead to identity theft. Some people might not know their identity was stolen until it's too late. You can identify any bank accounts or credit lines that may have been opened without your authorization then take action to get them closed. By regularly performing a free credit check, you’ll get the information you need to protect your identity.
If you find inaccurate information on your credit report, you must immediately contact the credit bureau where you received the report. The credit bureau can take up to 45 days to research and correct any discrepancies they find. They will also automatically send your updated credit report to anyone who has requested it in the past six months or who has received a copy of it in the past two years.
The Difference Between a Credit Report & Credit Score
Credit reports are detailed financial records that contain your credit history and personal information. They list everything that a lender, creditor, or employer could need to know about you. Credit scores, on the other hand, are derived from credit reports by using a mathematical formula then are compiled by credit reporting agencies.
The formula used in credit scoring comes from the following items in your credit report:
- How often you pay your bills on time
- How much money you still owe to your current lenders
- The age of your lines of credit
- How much money you borrowed
- What type of credit you have (credit cards, mortgages, etc.)
Your Free Annual Credit Report
The Fair Credit Reporting Act (FCRA) entitles you to a free credit report each year. Reviewing your own credit report will not affect your credit score. Visit annualcreditreport.com to get your free credit report from all three national credit reporting agencies (Equifax®, Experian®, and TransUnion®).
Since your credit report contains a detailed history of your financial health and provides viewers a look into your creditworthiness, monitoring it for inaccuracies and errors can be very important. Understanding how your credit report is compiled, what it includes, and how it is used can help give you the knowledge and planning you need to stay in control of your financial well-being.
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