Imagine that you’ve been invited to join a friend on a weekend getaway. The only problem? Your dog has to stay home. Thankfully, you can solve this problem by hiring a pet sitter.
Of course, you aren’t going to have anyone watch over your four-legged friend. You’re going to ask them some questions first. Primarily, what’s their experience, and how often they’ll be able to walk your dog?
You might get asked similar questions by lenders when you apply for loans and credit cards. To find out, they might check your credit report.
What are credit reports, why are they important and what is in them? Read on to find out.
What is a Credit Report and Why is it Important?
You can think of a credit report as a snapshot of your financial situation.
Specifically, it contains active and closed credit accounts, the dates when the accounts were opened, the type of credit, and the payment history of the accounts. Basically, a credit report tells you what your financial habits are.
Companies may use the data to predict how likely you are to pay back your debts on time. As a result, credit reports are crucial for decisions about lending money in the form of credit cards, auto loans, or mortgages.
But that’s just scratching the surface. You may also receive different interest rates based on the information on your credit reports. Moreover, insurance prices, utility deposits, and even job applications are affected by your credit history.
There are dozens of places where you can obtain your credit report. The three big credit bureaus, however, are Equifax®, Experian®, and TransUnion®. Often referred to as credit reporting agencies, these companies work independently. As a result, each bureau has its own interpretation.
Credit Reports vs. Credit Scores
Your credit scores are also influenced by your credit reports. The reason for this is that credit scores are calculated using information from your credit report. Essentially, your scores summarize the information in your credit report.
Nevertheless, keep in mind that there are multiple credit reports and scores as well. The information used to calculate scores can differ based on a variety of factors, including which bureau provided the information.
What’s in Your Credit Report
There are a number of elements that make up your credit report, including personal information, your credit account history, and your credit inquiries. Credit bureaus receive this information from your lenders and creditors. FICO® Scores are used to determine whether you are a good credit risk for future lenders.
Although all credit reports contain basically the same information, they are formatted and reported differently by the credit bureaus. And, they generally contain the following four categories.
Personally Identifiable Information (PII)
Credit reports may contain information about you that identifies you, such as:
- Your name and any nicknames you have used with a credit account.
- A list of current and previous addresses.
- Date of birth.
- Social Security number.
- Phone numbers.
- Information about past and current employment.
What to look for when viewing PII.
- Is your name spelled correctly?
- Do you see your current address on the report?
- Make sure the digits on your Social Security Number are not transposed incorrectly.
Dispute any incorrect information with the credit bureau(s) that have this information on their reports. The “Personal Statements” section might also include items such as a security freeze, fraud alert, or power of attorney comments. If you are submitting a personal statement, ensure that it is accurate.
Credit Accounts
Information about your borrowing and repayment history can be found under “credit accounts” in your credit report. This could include credit cards, mortgages, car loans, student loans, and mortgages from the past. Additionally, each account listing will likely include the following information:
- Account type, such as a revolving credit account, an installment loan, or a mortgage.
- The name of the lender.
- Loan amount or credit limit.
- The balance of your account.
- History of payments.
- If applicable, the date of opening and closing.
You may also be able to view any collection activity recorded by the credit bureau. In some agencies, people with credit accounts are listed separately, while in others, they are listed together.
What to look for when viewing credit accounts:
Your account is in good standing if you have made payments on time and adhered to your creditor’s terms. Even though your report states you are in “good standing,” make sure you are aware of the account (verify the name and number) and that the date of opening, balance, payment status, and payment history match.
In negative accounts, payment information is displayed about accounts that have not been paid. All account information should be accurate, including the account number and recent balance, as well as past due amounts and payment histories. Don’t hesitate to contact the credit bureau(s) and/or creditors if you notice anything that’s not right.
Credit Inquiries
On your credit report, you may find two kinds of inquiries. There is only one factor that can influence your credit scores, however.
Having your credit report checked by a lender after applying for a loan will result in a hard inquiry. Typically, they involve extending credit or lending money. Depending on your credit score, hard inquiries can appear on your credit report for two years.
When you do the following, you might trigger a hard inquiry:
- Apply for a credit card or loan.
- Increase your credit line.
- Apply for a mortgage or rent a house or apartment.
- Sign up for a phone, cable, or internet service.
Unlike hard inquiries, soft inquiries do not affect your credit scores. They are, however, recorded on your credit report for a period of two years. And, a soft inquiry does not appear on a potential lender’s credit report.
You may receive a soft inquiry if:
- Do a credit check on yourself.
- Obtain an insurance quote.
- Take part in a background check for a job you are interested in.
- Receive a prequalification or preapproval credit card offer.
What to look for in credit inquiries:
In addition to checking your credit report, you should make sure that there are no “funny business” transactions going on. See if your credit has been checked and if it was shared only with you or with others. Your credit report will list the creditor’s name, business type, and inquiry date. Consult the credit bureau(s) if you see a suspicious business name or are confused about why a specific company checked your credit.
Public Records
You may also see negative information on your credit report based on information reported in public records. Examples include:
- Bankruptcies.
- Foreclosures.
- Tax liens.
- Civil suits and court judgments.
- Overdue child support.
If you see a debt collection on your credit report, don’t panic. Despite the fact that there are no quick fixes for repairing your credit, there are things you can do to improve your FICO score. For example, getting current on missed payments.
What to look for in public records:
A Chapter 7 bankruptcy stays on your credit report for 10 years after it’s filed. On the hand, after seven years, a Chapter 13 bankruptcy can be wiped out. In case either of these appears on your report, remember this.
When applying for credit, always verify that the information on your credit report is accurate so that your lender sees the most accurate FICO Score. It is your responsibility to notify the appropriate credit bureau of any errors on your report.
What Credit Bureaus Aren’t Telling You: Our “Financial Surveillance” System
Consumer credit bureaus track consumers’ credit histories, including their payment history and overall debt load. However, they may also track everything from bouncing a check to applying for health insurance as well.
“In any one of these everyday scenarios, there’s a good chance your information is being logged, cross-referenced, bought, sold, and scored among a sprawling network of consumer data brokers,” writes Adam Hardy for Money. “And that data can be used against you when it comes time to apply for a loan, land a job, rent a place to live, and even innocuous things like sign up for a new phone plan.”
Financial information not related to debt.
Additionally, the bureaus maintain information about consumers’ home addresses and employment records that have nothing to do with credit, notes MarketWatch. Lenders use this data to evaluate borrowers when they apply for credit, even denying them a loan without calculating credit scores. According to Louis Hyman, an assistant professor of consumer-credit history at Cornell University, people who move addresses often may be considered less financially stable and harder to track down if they owe unpaid debts. A similar scenario can be seen with people who change jobs frequently, he says.
Consumers’ home addresses and employment records are also kept by the bureaus. Lenders can use this information to evaluate borrowers when they apply for credit – even to reject them.
How often you move.
Louis Hyman, an assistant professor at Cornell University and a consumer-credit historian, says that people who change their addresses often are believed to be less financially stable. In the same way, those who change jobs frequently might miss payments more often.
Credit bureaus say this information is crucial for accurate credit reports. According to Consumer Data Industry Association spokesman Norm Magnuson, consumers’ addresses help bureaus identify the right credit report to provide lenders. Since some consumers do not provide social security numbers, social security numbers alone will not suffice. Despite consumer protection laws, the CDIA cannot comment on lender underwriting practices.
Your salary.
It is also possible to obtain information about consumers’ salaries. For example, in 2007, Equifax acquired a data-mining company, which provided it with information on more than 33% of U.S. adults. Equifax maintains a private database of salary records for 33% of U.S. adults. This information can be used by mortgage and car finance companies to evaluate the ability of consumers to repay loans.
According to Equifax’s spokesman, Timothy Klein, the company discloses salary information only when permitted by the Fair Credit Reporting Act, which was passed in 1970 and regulates how consumer data can be shared. As stated in a company statement to Congress, the company is in “compliance with all applicable consumer protection laws.” According to him, this data will only be provided to lenders with consumer consent.
Keeping Track of Your Every Move
There’s no way to completely opt out of becoming part of this financial data matrix since you probably didn’t ask to be included. In other words, you should watch the watchmen. However, it might be a good idea to clear your schedule.
“To get a better sense of how daunting this task is, I pulled several of my own reports,” adds Hardy. “The CFPB keeps a list of roughly 60 of the largest consumer-reporting companies. I chose six of them: ‘the big three,’ ChexSystems, The Work Number (an employment-history agency owned by Equifax), and LexisNexis (a data firm that tracks property, bankruptcy, and other public records).”
It took Hardy about five hours to pull these six reports. “I had to ace timed multiple-choice questionnaires,” he adds. Getting the answer wrong would lock me out, he says. Because my requests for reports were not working properly on the company’s website, I sent multiple emails to the help desk. “To access my employment-history report, I had to send in scans of a recent pay stub and my driver’s license over an encrypted email service,” Hardy states.
“In most cases, I received a digital copy of my report once I cleared the gauntlet,” Hardy continues. “But some companies only send reports through snail mail, so it can easily take weeks to compile everything.”
“The breadth of my consumer files was eye-opening.” Among the information in the reports were past jobs, about a dozen previous addresses, email addresses, phone numbers, salaries, debts, assets, and more. “In some cases, the information was incredibly specific: My employment report, for instance, included a breakdown of the number of hours I worked each week when I was a server at a quasi-French restaurant in 2013.”
Mistakes Caused by Big Data are Bigger
Additionally, consumer reporting agencies can convince landlords, employers, banks, and insurance companies that their dossiers are necessary.
According to Nelson from the National Consumer Law Center, more than 90% of employers and landlords use reporting agencies to run consumer background checks.
“Sure, it makes sense that the person screening my job or apartment application would want to know if I have an open felony,” Hardy adds. “But do they really need to know my credit score, or my past four telephone numbers, or the fact that I got a traffic ticket in 2015 (which I contested in court and won, by the way), or how many hours I logged in that part-time job a decade ago?”
It gets worse.
A paper in the spring 2022 issue of the American Business Law Journal suggests that credit bureaus and financial technology companies gather more behavioral and lifestyle information to determine creditworthiness, including SAT scores and social media posts.
“The scope of data that’s out there,” says Lindsay Sain Jones, a legal studies professor at the University of Georgia and co-author of the report, “is sort of mind-blowing.”
This is what Jones refers to as “alternative fringe” data collection, which is gathered right from the web without the consent of consumers. In many cases, the use of this data is disguised as helping unbanked or “credit invisible” populations, which tend to be racial and socially disadvantaged.
Until now, this practice has not been widely adopted, but that could change as more CRAs adopt an “any data is credit data” approach.
“We’re concerned about how more and more information is making its way into these models,” says Sophie Sahaf, a deputy assistant director at the CFPB, “and what that means for surveillance risk for consumers and intrusion into their lives.”
A Summary of Your Rights Under the Fair Credit Reporting Act
Under the Fair Credit Reporting Act (FCRA), consumer reporting agencies are required to maintain accurate, fair, and private information. In addition to credit bureaus, there are specialty agencies that sell information about check writing histories, medical records, and rental histories.
The following is a summary of your major rights under the FCRA. For more information, including information about additional rights, visit www.consumerfinance.gov/learnmore.
- It is your right to know if your file has been misused.
- Your file should be made available to you if you wish.
- Obtaining your credit score is your right.
- It is your right to dispute inaccurate or incomplete information.
- Inaccurate, incomplete, or unverifiable information must be corrected or deleted by consumer reporting agencies.
- Negative information may not be reported by consumer reporting agencies if it is outdated.
- Your file is only accessible to a limited number of people. Your consumer report may only be used by people who have a legitimate need for it.
- Reports can only be provided to employers with your consent.
- Credit and insurance offers that are prescreened based on your credit report can be limited. You have the right to opt out of unsolicited “prescreened” credit and insurance offers by calling the toll-free number provided in these offers. You may opt-out with the nationwide credit bureaus at 1-888-OPTOUT (1-888-567-8688).
Furthermore, you have the right to put a “security freeze” on your credit report.
This prevents the credit bureaus from releasing information about you without your permission. A security freeze prevents credit, loans, and services from being approved in your name without your permission.
It is important to know, however, that if you use a security freeze to control who can view your credit report, any subsequent requests or applications for loans, credit, mortgages, or any other accounts involving credit extension may be delayed, interfered with, or prevented from being approved within a reasonable timeframe.
Rather than freezing your credit file, you can place an initial or extended fraud alert for free. In the initial fraud alert, a consumer’s credit file is flagged for one year. Before extending new credit, a business must verify a consumer’s identity upon seeing a fraud alert on their credit file. Those who have been victimized by identity theft are entitled to extended fraud alerts, which last for seven years.
Credit Report FAQs
1. What information is included in my credit report?
Your personal credit report contains:
Name, address, phone number, Social Security number, date of birth, and employers at present and in the past.
In the version of the credit report you receive, your spouse’s name may appear, but not in the version shared with others. As this information comes in part from your credit applications, its accuracy depends on how accurately and consistently you fill out the forms.
An account’s specific information, such as the date it was opened, the credit limit, the amount of the loan or credit card, the balance, and the payment pattern over the past few years.
The information is provided by companies you do business with.
Bankruptcy records filed in federal districts.
Records from the public are used for this information.
The names of those who have accessed your credit report.
Credit reporting agencies provide this information.
A dispute statement is a document that outlines the factual history of an account for both consumers and creditors.
In cases where a consumer disputes an account’s status, after the account has been reinvestigated, and if the consumer and creditor cannot agree on the status, a dispute statement is added. In the credit report, both the consumer’s and creditor’s statements will be included.
An excellent rental payment history from property management companies that give their information to RentBureau, a service provided by Experian.
2. What information is not in a credit report?
In most cases, a credit report contains no information about race, religion, medical history, lifestyle, political preference, friends, or criminal history.
3. Why check your credit report?
Checking your credit report is important for two reasons:
- Approximately five percent of American consumers have errors on one of their three major credit reports, which could result in them paying more for products such as auto loans and insurance.
- The chance of identity theft is reduced when you check your credit report.
4. How do I obtain a credit report?
Depending on your financial institution or credit card issuer, you may be able to get your credit report for free. Additionally, you’re entitled to a free credit report from each of the major credit bureaus once a year.
Getting your reports from all three bureaus is important because they may contain different info. This gives you three opportunities a year to verify your own information and credit and to prevent fraudsters from using your identity to open accounts.
Also, if you’re rejected for a loan or credit card, you’re entitled to a free credit report.
5. In the event that a company takes action against me because of something in my credit report, what should I do?
Make sure your reports are up to date before applying for a loan, credit, insurance, or a job. Get your credit report corrected if you find errors by contacting the credit bureaus and the company that provided the information.
You’re entitled to another free credit report if a company takes “adverse action” against you due to something in your credit report. In order to get it, you must request it within 60 days of receiving notice of the action. A notice must include the name, address, and phone number of the credit bureau that provided the company with your credit report, so you know which credit bureau to contact.
