What Is a Credit Report and How Do You Check It?
Your history of responsibly handling debt and making payments is documented in what is called a credit report. Lenders and other businesses will look at it like a report card before determining whether or not to do business with you based on these details.
Your credit report contains a historical record that details when and how you pay your bills, as well as the amount of debt you carry and the length of time you have been responsible for managing credit accounts.
Your credit report can be used by creditors and other firms as a resource for learning more about your history of borrowing money, which assists them in making judgments regarding whether or not to extend you credit.
Credit reports are utilized for a variety of purposes, including the calculation of credit ratings, the verification of identity, and other activities, all within the parameters set forth by law.
What Is a Credit Report?
A credit report is a summary that details your active and closed credit accounts, the dates the accounts were opened, the type of credit associated with each account, as well as your payment history for each account. To put it another way, the details contained in each of your credit reports pertain to your previous behavior with regard to your finances.
The details can be used by businesses to make predictions about the likelihood of timely repayment of debts by customers.
Because of this, the details contained in your credit reports are extremely important to the decision-making process when it comes to whether or not to give you money in the form of credit cards, mortgages, auto loans, or any number of other financial products.
However, that is only the beginning of the reasons why the history of your credit might be so crucial. When you borrow money, the interest rates that are given to you can also be impacted by the details contained in your credit reports.
Additionally, your credit history might have an effect on the premiums you pay for insurance, the deposits you make for utilities, and even your chances of getting a job.
What Is Shown in a Credit Report?
Personal data from credit reports may include your Social Security number, past and present addresses, and employment history.
These reports also provide a summary of your credit history, which includes details on how many and what kinds of accounts you have with banks or credit cards that are in good standing or past due, as well as specific account details like high balances, credit limits, and the dates that your accounts were started.
Credit inquiries and details concerning accounts that have been reported to credit bureaus, such as liens and wage garnishments, are also included in a consumer’s credit report. Bankruptcy filings tend to remain on credit reports for roughly 10 years, while negative details normally remain for seven.
How to Check Your Credit Report
When you request for credit, the credit provider will often ask for your permission to check your credit report. You will be asked to offer this consent before they will check your report.
The phrase “credit provider” encompasses more than just financial institutions like banks and credit card firms. If you have a cell phone contract, the company providing your service would fall under this category (pay-as-you-go service providers would not).
Keep in mind that when assessing your creditworthiness, different financial institutions will focus on different factors. Additionally, they might take into consideration a variety of additional parameters.
During the coronavirus pandemic, for instance, you might have been given a furlough and allowed to take a break from getting paid. Even though this won’t have a direct impact on your credit rating, it could make it more difficult for you to obtain credit in the future.
It is your legal right to obtain a free copy of your credit report once per year from each of the nationwide credit reporting companies.
If you have never requested a copy of your credit report before, or if you haven’t checked it in a while, it’s usually a good idea to acquire one from each of the major credit reporting agencies.
This is because, despite the substantial overlap, data from various credit bureaus may contain discrepancies.
You can get in touch with the credit rating organizations directly through their websites or offices if you would rather get a hard copy of your credit report rather than an electronic one.
What Should You Look For In a Credit Report?
In order to keep an eye on your credit profile and ensure that your identity is secure, it is a good idea to review your credit report on a regular basis.
If you want to work on improving your credit rating, reviewing your credit report can give you a considerable measure of details that can help you. When reading your credit report, here are some things to keep an eye out for:
- Verify that the details you’ve provided about yourself are correct.
- Make sure that you are familiar with each of the accounts by going over each of them one by one.
- Make sure that the current standing of each account matches the details that you have recorded.
- Assert the percentage of available credit that is being used for each revolving credit account.
- Make sure that all of your closed accounts are included in the report and that they are marked as closed by the customer whenever it is relevant to do so.
- Ensure that all legal actions, including lawsuits, bankruptcies, tax liens, and other legal actions, are recorded accurately
If you have reason to believe that any of the details related to your account is incorrect, you should check your records and then get in touch with your creditor so that they can investigate the matter. In addition, if you find errors on your report and want to dispute them, you can usually do so on the credit bureau’s website, over the phone, or by sending a letter.
Why Do Credit Reports Matter?
Credit reports contain details that are used to generate credit ratings, which are significant figures that can have a major effect on your financial well-being.
With a long track record of timely payments, you may be able to qualify for better interest rates and terms on credit cards and loans, as shown by your credit report.
However, if you have negative details on your credit reports, such as overdue payments, bankruptcy, or similar items, your credit rating will drop, making it more difficult to get authorized for credit cards and loans or resulting in a higher interest rate.
And if you’ve been the victim of identity theft, your credit report will show any fraudulent accounts opened in your name. Signs of fraud include unexpected requests for your credit report or the opening of new credit accounts or loans. If you check your credit reports on a regular basis, you can catch any fraudulent activity sooner and get it fixed.
Whether you view it as a friend or enemy, your credit report will be there to attest your credibility whenever you request for a loan or finance a major purchase like a home or vehicle. However, credit reports can also be utilized for a wide variety of other vital purposes. The following are a few less obvious uses for your credit report:
- Finding employment. Potential employers can learn a lot about you and your reliability from your credit record.
- Fees for car insurance. A customer’s credit history may be used when calculating auto insurance rates.
- Relocating to a rented apartment. A good tenant screening criterion is a renter with a proven track record of paying rent on time.
- TV, internet, and cell phone services. When deciding whether or not to require an upfront security deposit, several telecoms, internet, and cable companies may check your credit history.
How to Get a Free Credit Report
It was previously the case that the only way to check your full report without paying for it was to join up for a free trial with one of the credit reporting agencies for a period of thirty days, then cancel your account before the trial period was through to avoid being charged.
However, there are now more options available, and there is even the possibility of earning money for checking.
Your decision for how to check your report will be based on what features of credit monitoring are most essential to you. You have the option of using a service that monitors your credit for free for a period of 30 days, or you may use a service that is less comprehensive but free forever.
Lenders, organizations, and credit card issuers all examine a consumer’s credit history to determine if they can trust that person with their money.
In addition, given that they are used to evaluate a person’s “reliability,” credit reports are frequently consulted in a wide variety of contexts outside of the acquisition of a credit card or loan. These contexts include the rental of an apartment and the pursuit of employment.
Creditors want to see debtors who have a diversified variety of accounts, including credit cards, auto loans, and mortgages, so having a healthy credit mix can have a positive effect on both your credit rating and your future potential to draw money.
You can use the details in your credit report to better comprehend the factors that go into determining your credit ratings, as well as use that knowledge as the foundation for developing a strategy to enhance those ratings.