A credit report is a record of your credit activity and credit history.
When you are approved for any type of credit (loan, credit card, line of credit, etc.), the issuing company (creditor) keeps a careful record of your personal information, payment history, account balance, and overall credit profile. Every month, the creditor updates and sends this credit information to one or more credit reporting bureaus.
In the United States, there are three major credit reporting bureaus (sometimes called credit agencies): Equifax, Experian, and TransUnion. Each credit bureau collects and combines the information they receive about your various credit activities into a credit report. As a result of this process, individuals have a separate credit report created by each credit bureau. Not all creditors report information to all three credit bureaus, so the information in each report can vary.
The credit bureaus are for-profit corporations that sell your personal credit profile for money. When you apply for new credit, the potential lender requests your credit information from one or more of the credit bureaus. The credit bureau then pulls your credit profile and delivers the credit information to the lender (in exchange for a fee).
Your credit profile (report and credit score) is then reviewed by the potential lender to determine your overall credit worthiness. If your credit report includes late payments or other negative remarks, the lender might reject your application. If your credit report displays a consistent payment history and responsible credit usage, the lender will be more willing to extend you credit at a lower interest rate. Many lenders now use automated systems to instantly approve or reject many applications for credit.
Other businesses might review your credit information to make non-lending related decisions. For example, many employers now request your credit profile as part of the hiring process. Many insurance companies use credit information in the underwriting process to identify high-risk applicants. Many landlords will review your credit profile before extending a rental agreement. Although these examples represent a small number of potential scenarios, they highlight the importance of building a positive credit profile.
How to Obtain Your Credit Report(s)
Under the Fair Credit Reporting Act (FCRA), you are entitled to receive one free credit report from each of the three reporting agencies (per year). You can request your most recent credit report from each bureau through annualcreditreport.com.
When you receive each report, you should review and verify all of the information. If someone has fraudulently stolen your identity, you might find unexpected personal information, credit inquiries, or accounts listed within your report. This information can be removed.
Federal law allows you to dispute any inaccurate information on your credit report, free of charge. You may submit your dispute to the business who provided the information and/or to the credit reporting agency who included the information on your credit report. If your dispute is valid, both parties (the business and credit bureaus) are required by law to remove the false information.
Most disputes can be handled 100% online. The Federal Trade Commission provides detailed information about how to dispute credit report errors, and the Consumer Financial Protection Bureau provides additional guidance about disputing information on credit reports.
What’s in Your Credit Report?
Your credit report contains specific information collected and reported by each bureau, including:
Personal Information: Including your full name, date of birth, employment information, current and former addresses, and Social Security number. When you apply for new lines of credit, lenders often ask questions related to your personal information to verify your identity and prevent fraud.
Credit Accounts: Detailed information on all current and previous credit accounts, including revolving credit accounts (credit cards) and installment accounts (such as student, mortgage, or credit-builder loans). This section also includes creditor names, account numbers, current balances, payment history and account status (including whether or not the account is past due).
Public Records: Information on previous liens, foreclosures, bankruptcies, and certain court rulings.
Inquiries: A list of companies who have pulled your credit report in the past.
Your credit report does not include your credit score, but you can easily check your credit score for free.
When is Information Removed from Your Credit Report?
Some information in your credit report is removed after a specified period of time. The reporting period depends on whether the information is positive or negative.
- Open Accounts (with no negative payment history): Remain on your report indefinitely as long as the account is open.
- Closed Accounts (with no negative payment history): Remain on your report for 10 years from the date of closure.
- Late Payments: Remain on your report for 7 years from the original delinquency date.
- Collection Accounts: Remain on your report for 7 years from the original delinquency date.
- Chapter 13 Bankruptcy: Remain on your report for 7 years from the date of filing.
- Chapter 7 Bankruptcy: Remain on your report for 10 years from the date of filing.
- Unpaid Tax Liens: Remain on your report for 10 years from the date of filing. Once paid, the lien will remain for 7 years from the paid date.
- Civil Judgements: Remain on your report for 7 years from the date of filing.
Credit Inquiries remain on your report for 2 years from the date of inquiry, but have a minimal impact on your credit profile.
If the negative information in your credit report is not removed within the timeline listed above, you can contact each of the credit bureaus to file a dispute and have it be removed. They are required by law to comply.
Is Your Credit Report Important?
A wide variety of businesses use the information in your credit report to make important decisions about you.
Financial institutions check your credit before approving any type of loan or credit card application. Insurers use your credit to determine your risk profile and establish your monthly premiums. Employers and landlords check your credit to determine how responsible you are. Even your credit score is determined by your credit report.
Your credit report affects many aspects of your life, so it’s important to build a positive credit profile and establish good credit habits as early as possible.