A credit report is essentially a financial report card that outlines how well you have managed debt. When you apply for a loan, lenders typically review your credit history to assess how risky it is to lend you money. Or a landlord might review your credit report when you apply for an apartment.
Understanding what to pay attention to while reading your credit reports can help you catch credit reporting errors and even signs of identity theft. Keep reading to learn what’s in your credit reports, how often to check them and how to access them for free.
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What Is a Credit Report?
A credit report is a document that details your financial history, including payment history, the status of your accounts and any outstanding balances. The three major credit reporting agencies — Equifax, Experian and Transunion — collect this information from creditors and public records.
Your credit score is calculated based on the information in your credit reports. Positive information listed in your reports, such as on-time payments, can help you build credit. On the other hand, late payments in your report can drag down your score.
How Are Credit Reports Used?
When you apply for credit, such as a home or auto loan, lenders typically review your credit reports to determine whether to lend you money, how much you can borrow and your interest rate.
Having a strong credit history can improve your chances of qualifying for a lender’s lowest advertised rates. However, if you have little credit history or negative marks like missed payments, you may have trouble securing a loan without a co-signer.
When you apply for an apartment, landlords might review your credit reports to decide whether to approve your application. Depending on where you live, an insurance provider might review your credit-based insurance score, which is calculated based on information on your credit reports, to determine your insurance rates.
[Read: Best Credit Cards for Fair Credit.]
What Information Is Included In Your Credit Report?
The information in each of your credit reports may vary depending on which credit bureau compiled it. But they all generally contain the following information.
Personal Information
Your credit reports contain your personal information, such as your name, Social Security number, date of birth, address and employment information.
List of Credit Accounts
Credit reports also include records of your current and previous credit accounts. These records list details about your accounts, including payment history, outstanding balances, account statuses, lender names and the dates you opened and closed the accounts.
Credit Inquiries
Credit inquiries show who has access to your credit reports. There are two types of credit inquiries: soft and hard. A soft credit check has no impact on your credit score. A hard credit check, which usually happens when you apply for credit, can temporarily lower your credit score.
Public Records
Public records, such as bankruptcies, civil judgments and foreclosures, may also appear on your credit reports. Foreclosures can stay on your credit reports for up to seven years, while bankruptcies can remain for up to 10 years.
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How Often Should You Check Your Credit Reports?
John Ulzheimer, a credit expert formerly with FICO and Equifax, recommends checking your credit reports every few months. Doing so can help you catch potential errors and maintain good credit health.
“It’s also a good practice to review your credit report three to six months ahead of making a large purchase, such as a mortgage or auto loan,” says Christina Roman, consumer education and advocacy manager at Experian. She says doing this enables you to take steps to boost your credit score before applying, if necessary.
How to Get Free Copies of Your Credit Report
The easiest way to access your credit reports is to visit AnnualCreditReport.com. This government-authorized website allows you to request free weekly credit reports from the three major credit bureaus.
What You Should Pay Attention to When Reading Your Credit Report
“When reviewing your credit report, first and foremost, ensure that all information is accurate and up-to-date,” says Roman. She recommends examining your credit accounts and paying close attention to your outstanding balances, payment history and account statuses.
Ulzheimer says if you spot one of these items on your reports, it could be a sign of fraud:
— An address where you’ve never lived
— Hard inquiries by a lender from whom you never applied
— An account reported by a lender you don’t have a relationship with
— A debt collector attempting to collect a balance from a creditor you had no relationship with
If you spot any credit reporting mistakes, you can dispute them with the respective credit bureau. If you think you’ve become a victim of identity theft or fraud, consider placing a freeze on your credit reports. This prevents someone from opening a new account in your name. You can also file a police report and claim on IdentityTheft.Gov.
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What Is a Credit Report? originally appeared on usnews.com
