What’s in Your Credit Report
Credit reports are full of coded information that can be quite confusing. The primary function of these reports is to help businesses to make decisions, and codes simplify that process. If you read through your report line by line, though, and use the information provided below, you will be able to get a good understanding of what is being reported about you.
No matter where and how you access your report, the same categories of information will be listed:
Credit Reports: Identification
Most credit reports begin with personal data, such as your name and any former names. It also lists a history of your addresses and employment, changes in marital status, your date of birth, and your social security number.
Credit Reports: Public Records
The public records section reflects all lawsuits to which you are a party, as well as any liens or legal claims on your property. Any type of activity that is recorded with the county will be reflected here too, including bankruptcies, judgments, foreclosures, and court-ordered child support collections.
The bulk of a credit report provides detailed information about your credit history. Read this section carefully for accuracy, as well as to know when any negative information is due to drop off. It will list such data as:
- Trade lines
- The names of your creditors and their partial account numbers.
- The dates of last payment activity.
- The date you opened each account.
- Your payment history.
- If you have made payments late, the number of days you are or were past due will be indicated.
- Each account’s current balance.
- Whether accounts are held jointly or individually.
- Whether accounts are open, closed, or in collections.
- The credit limit for each account.
Credit Reports: Inquiries
Each time you apply for credit, an inquiry appears on your credit file. Inquiries also appear when a creditor checks your file after you’ve applied for credit, when your current creditors do a routine credit analysis, and when a potential landlord or employer checks your report.
Credit Reports: Time Frames
Don’t despair if you have negative information on your credit report. Most of those items are removed automatically after a specific period of time (often called “aging off”). Accounts that you have consistently paid on time, or that were paid in full as agreed may be reported indefinitely. Having this kind of long-term positive information on your report reflects well on you as a credit risk.
So what will eventually be purged from your credit file, and how long will it take? It depends on the activity:
- Inquiries are reflected on your credit report for two years.
- Lawsuits, judgments, liens, foreclosures, Chapter 13 bankruptcy, and late payments, will show for seven years from the time they were reported. The seven-year period for Chapter 13 bankruptcy begins on the date of filing. For accounts in collection agencies, the period starts the date the account was written off by the original creditor and sent to the collection agency.
- A Chapter 7 bankruptcy will remain for ten years from the date of filing. A credit score is one of the most important tools lenders use to evaluate your application for credit. Scores are determined only by the information on your credit report that can predict future credit performance. Therefore, income, employment history, race, religion, national origin, gender, marital status, and age are not factors.
Credit Reports: FICO Scores
Fair, Isaac and Company developed the most commonly used score, called a FICO score. These scores range from 300 to 850, with a higher number being indicative of less risk. Generally, the higher your score, the easier it will be for you to get a loan or other credit instrument with a low rate of interest. Though each of the three major credit bureaus uses this system, it is sometimes called a Beacon or Empirica score.
When you access all three of your credit reports, you may find that your score is different on each. This is usually because each report contains slightly different information.
Though there are many categories of credit information used to determine your FICO score, some are much more significant in their impact than others:
Payment history = 35 percent. The more consistent your payment history, the better your score will be. Recent, frequent, and severe late payments have a particularly strong negative impact. Bankruptcies, judgments, and collection accounts will also lower your score dramatically.
Amounts owed = 30 percent. The amount of outstanding debt you have has a strong impact on your credit score. Carrying high balances, especially if the balances are close to the credit limit, can lower your score.
Length of credit history = 15 percent. Accounts that you’ve had for more than two years will have a more positive impact on your score than newer accounts.
New credit = 10 percent. The type, number, and proportion of recently opened accounts matter to your score, as do inquiries. All mortgage and auto loan inquiries within a fourteen-day period are considered just one for scoring purposes, and any mortgage or auto loan inquiries made within 30 days of an application are disregarded. Neither accessing your own reports nor employment inquiries is factored into your score. “Pre-approved” credit offers have no impact either, unless you actually apply. Working toward reestablishing a positive credit history after past payment problems counts in this section as well.
Types of credit used = 10 percent. Having and using a variety of credit instruments (such as credit cards, retail accounts, installment loans, a mortgage, and consumer finance accounts) responsibly is favorable to your score. It proves that you can handle the different responsibilities that come with each debt type.
Credit scores constantly change with credit activity, and recent events matter more than what happened long ago. While there is no perfect credit score, most mortgage lenders look for a score of at least 620 when considering you for a good loan.
Credit Reports: Bankruptcy Risk Scores
A bankruptcy risk score analyzes the data in your credit file for traits that are common among those who file for bankruptcy protection. Creditors use them to make as precise lending decisions as possible. Be aware that for some bankruptcy risk scoring models, higher numbers indicate a greater likelihood of default (with scores ranging from —200 to 2018). Others follow the more traditional system of lower scores indicating an increased level of default risk.
Free, Annual Credit Reports
The Fair and Accurate Credit Transactions Act of 2003 (FACT Act) enables you to receive a free copy of your credit report once every 12 months from each of the three nationwide consumer reporting agencies: TransUnion, Experian, and Equifax. Simply visit www.annualcreditreport.com to order your free credit reports.
Please note that www.annualcreditreport.com is the official site where you can receive your free credit reports and should not be confused with consumerinfo.com, freecreditreport.com, or other similar websites.
Free & Confidential BALANCE Credit Report Review
A specialist with the BALANCE Financial Fitness Program will explain the information on your credit report, show you how to correct inaccuracies and help you with a plan to improve your credit score, BALANCE can even provide a low-cost credit report review (with score) or help you access one on your own. You can also obtain the free, yearly credit report you are entitled to receive, as mentioned above.
Credit Reporting Agencies
If you have need for additional services beyond your free credit reports, TransUnion, Experian, and Equifax all offer similar services that you can purchase to help manage your credit profile and keep your credit rating strong. Some of their services include:
- 3-in-1 monitoring and email / wireless alert services that notify you of key changes to your three nationwide credit reports.
- FICO score monitoring, including alerts when changes to your FICO score might impact the interest rates you receive.
- Identity theft services that include scanning the internet for your personal information on suspect websites, email / wireless alerts when changes are posted to your credit profile, and identity theft insurance.