Your credit report is probably one of the most important financial reports you will need to learn to understand. As a consumer that relies on credit in building personal net worth, keeping your credit report in great shape should be on your list of top priorities.
Find out what’s in your credit report and why it’s important that you avoid any possible damage while managing your finances and debt.
What Does a Credit Report Tell You?
A credit report is a statement issued by credit bureaus or credit reporting agencies and contains all information about your credit history and current credit activities.
Credit bureaus gather and store financial reports about you that are submitted by creditors and other financial agencies that have given you. From this information, credit bureaus analyze your credit activities via scoring models to calculate your credit score.
If you suspect any fraud activity on your report you might want to freeze your credit report.
Your credit report has 4 main categories:
- Identity – This is all about your personal information such as your name, Social Security Number, date of birth, contact details, and employment history. Make sure that you keep this information updated when changes occur.
- Existing Credit Information – Lenders report the following nature on your credit account: type of credit account, amount of credit, date when you opened the account, terms of credit, payment activities, and outstanding balance.
- Public Records – State and county courts also contribute information to your credit report. Civil suits, judgments, liens, foreclosures, and overdue debts that have been sent to collection agencies and bankruptcies all appear in this section.
- Recent Inquiries – Every time you make a hard inquiry, you authorize the lender to request a copy of your credit report. This section shows a list of businesses or individuals who have requested a copy of your report in the past 2 years.
What Agencies Maintain Credit Reports?
Credit reports are maintained by 3 credit reporting agencies also known as credit bureaus: Equifax, TransUnion, and Experian.
Your credit report is analyzed and updated regularly upon submission of information from creditors you have accounts with. In return, they are permitted under the law to send your credit report to businesses, creditors, or insurers upon their request.
Once on hand, creditors use these reports that contain your credit score to help them make decisions on what type of loan program to offer you. Other financial institutions and businesses also rely on your credit report to determine whether they should offer you insurance, allow rent on an apartment to you, or approve a utility or cell phone service contract among others.
Anatomy of a Credit Score
Ever wonder how your credit score is evaluated and what credit behavioral factors influence them?
Payment History (35%)
Your payment history tops the list of the most influential factors in determining your credit score. Lenders also give value to this information because they would like to know if you are at risk of defaulting payments.
What You Owe (30%)
This part of the score refers to your credit utilization ratio. This is how much you owe against your total available credit. As a general rule, you should limit this ratio to no more than 30%.
Length of Credit History (15%)
The age of your accounts and account activity are also influential in your credit score. You are advised not to close your old credit accounts.
New Credit (10%)
The number of hard inquiries you make and recently opened accounts show up in this section of your score.
Types of Credit Used (10%)
Maintaining a disciplined diverse portfolio of credit accounts helps raise your score.
Who Looks at Your Credit Score Before Making a Decision About Your Credit Application?
Your credit report reveals many aspects of your borrowing activities. The following businesses and potential lenders can request your credit report to determine the applicable loan product or program that best fits your credit score.
- Banks and Financial Institutions
- Department Stores and Other Retailers
- Credit Card Companies
- Insurance Companies
- Utilities, Cell Phone, and Cable Providers
- Collection Agencies
- Prospective Employer
How to Get Your Credit Report?
It is important to regularly check your credit report in order to know how much of its information is accurate. Every 12 months you are entitled to a free credit report from each of the 3 credit bureaus.
You can request your report through the Annual Credit Report 3 different ways:
You may call (877) 322-8228 to make a request. Your report will be mailed to you within 15 days.
Send your request to:
Annual Credit Report Request Service, P.O. Box 105281
Atlanta, GA 30348-5281.
Be sure to provide your complete personal information and contact details. Your report will be sent to you within 15 days after receipt.
By Online Request
Visit www.annualcreditreport.com and follow the simple 3-step process. When viewing your report online, you will be asked several security questions to ensure your identity. You can print your report for your record.
Your credit report plays an important part in your credit building journey. By regularly keeping yourself updated on your own credit status, you’ll be able to correct any damage done against it or use its information to make better financial decisions.