A credit report is the most important document of your financial life. Banks, landlords and sometimes potential employers all check your credit report to make decisions about your financial reliability — whether they want to lend to you or hire you. Everyone should understand the basics of a credit report and what yours means to you.
What is a credit report?
Not to be confused with credit scores — your credit report is a compilation of information about the way you handle your credit and debt accounts. It includes information about how much debt you’ve accumulated, how you pay your bills, where you live, where you work, whether you’ve filed bankruptcy or had a lawsuit judgment entered against you, and whether you’ve had a home foreclosed or vehicle repossessed. That sounds like a long list, right? That’s because it is. Some annual credit reports can be over 100 pages long.
There are three big credit bureaus — Experian, Equifax and TransUnion. And you have one credit report from each. Under federal law, you are able to pull your reports for free once per year.
What type of information is included in a credit report?
Your credit report contains detailed information about your credit cards and loans. For credit cards, your balance, credit limit, account type, account status, and payment history are all included on your credit report.
Loan balances, original loan amount, and payment history appear on your credit report. Public records like bankruptcy, foreclosure, repossessions, and tax liens are listed in a separate section of your credit report.
Credit reports also include a list of businesses that have recently checked your credit history, either for an application you made or a promotional screening. Credit checks are known as inquiries. The amount of inquires you have can affect your credit score, but only in the short term. This prevents someone from opening too many accounts at one time.
Why your credit report is important
A variety of businesses check your credit report to make decisions about you. Banks check your credit report before approving you for credit cards and loans, including a mortgage or auto loan.
Landlords review your credit report to decide whether to rent to you. Some employers check credit reports as part of the application process. Your credit report affects many parts of your life, so it’s important that the information included is accurate and positive.
Your credit report is the sole source of information for your credit score, a number that lenders sometimes use instead of or in addition to your credit report. A credit score is a three-digit number that helps rate your credit report. High credit scores show that you have positive information on your credit report while low credit scores indicate the presence of negative information. You can — and should — check your score at any time, as much as you want, by using Credit Karma.