Despite how common credit reports are, they’re actually surprisingly complicated documents. That’s true if for no other reason than that they contain so much information about both you and your financial situation. The potential for errors and even for fraud is enormous. For that reason, you need to know about your credit report, and put yourself in a position to keep an eye on it on a regular basis.
Credit reports are one of those situations where the saying an ounce of prevention is worth a pound of cure applies in a very serious way. You can often keep small problems from turning into big ones by moving quickly. And to do that, you’ll need to know what your credit report is all about, and what’s going on in it all the time.
This guide will help you to do just that.
What is a Credit Report
A credit report is a detailed list of your credit history over the past seven to ten years, depending on the information reported. The report is compiled from information reported to the three major credit bureaus (see below) by lenders and other creditors.
Since credit history is such an important criteria for lenders, most provide your payment experience to the one or more of the three bureaus. In doing so, they contribute to a common database of credit information on anyone and everyone with a credit history.
A credit report is a standardized presentation of your credit history. It’s used not just by lenders, but also employers, insurance companies, utility companies, and landlords to determine if they’ll do business with you.
Who Provides this Report
Credit reports are provided by many different sources, but the information contained in those reports comes from one or all of the three major credit bureaus:
Each credit bureau compiles your credit score based on the information reported to that bureau, and uses the FICO scoring model to calculate your score. For reasons we’ll discuss under “What are the Report Differences Between the Agencies”, your credit score – and even your credit report information – from each bureau will generally be different.
What Type of Information is Included in a Credit Report
The information appearing in your credit report includes the following:
Basic personal information. This includes your full name, current and previous addresses, Social Security number, year of birth, employer, and your telephone number.
Credit items. This is a listing of both open and closed credit accounts for the past seven to 10 years. Each entry provides the name of the creditor, the account number, the summary status of the account, the date the credit line was opened, the type of loan (installment, revolving, mortgage, etc,), the loan term, monthly payment, original loan amount/credit limit/high balance, and the current balance, if any. It also provides a summary of any derogatory credit history (see the first screenshot in the next section).
Public records. This is a list of any legal obligations, such as judgements, tax liens, foreclosures or bankruptcies. It may also list alimony or child support.
Credit inquires. This section provides a list of any lenders or other parties who have pulled your credit report in the recent past.
In many cases, the credit report will also provide the credit score(s) associated with the credit report.
Since there are three credit bureaus, a credit report can be from a single bureau, two bureaus, or three bureaus. A three-bureau credit report will usually be what’s known as a “triple merged” report. “Merged” refers to the fact that duplicate information between the three credit bureaus is eliminated, so that only one entry appears per creditor.
How to Read a Credit Report
The presentation of credit reports has improved considerably in recent years, making them more consumer friendly.
To demonstrate how to read a credit report, the two screenshots below are from Experian’s Online Personal Credit Report sample PDF. It isn’t a complete report (since they’re several pages long), but we’ve included two frames that show how your credit is displayed.
The screenshot below reflects an installment loan with a 12-month term, that was opened in October of 2012. It shows the basic information pertaining to the loan. But pay particular attention to the “account history” listed at the bottom. It reflects a 30-day late payment for November, 2012, and a 60-day late for December 2012.
Now there’s a bit of a discrepancy in this entry. Notice that Recent Balance shows $0 as of April, 2012. But the two late payments are reported subsequent to that date. It’s very likely these two late payments are reported in error. That’s something you will want to dispute, which we’ll cover in a later section.
The next screenshot so shows public records. If you have no public records, this section will be blank. But the screenshot below indicates that a claim had been filed for $200 in October, 2012. It’s not clear if this item has been paid, since the liability amount is indicated as N/A. This is another entry that may be open to dispute.
Notice from both screenshots there’s a significant amount of detail for each credit entry. When you’re reviewing your credit report, pay close attention to all the information presented. That’s how you’ll be able to determine that both the above entries may be errors.
If you don’t feel that you can adequately interpret a credit report, get help from someone who’s familiar with how they work. There’s no useless information in a credit report – all of it means something.
What’s Important in a Credit Report
What’s most important in a credit report is that it’s complete, and that all information is accurate.
Go through your report carefully, and make sure all loan accounts you have are included on the report. At the same time, check to see if any of those listed are not your accounts. Even though you have a unique Social Security number, your report may include loan accounts that are not yours. This is especially common if you have a common last name, like Smith or Johnson. You’ll have to get those removed, particularly if they show derogatory information.
Also check the numbers for each credit entry. A loan account may show you owe considerably more than you actually do. This can happen if the creditor has not updated the information in some time. It may even show an open obligation that was closed long ago.
In addition, you should carefully review the personal information. For example, a wrong address could be an indication that you’re being confused for another party.
How Often are Credit Reports Updated and How Often Should You Check?
Credit report changes don’t occur simultaneously. It would be convenient to say that all credit reports update on a set schedule, and on the same date, but that’s not true. They actually update on a continuous basis, but each in its own time.
Credit reports are dependent upon the reporting schedule of your creditors. For example, if you have an auto loan that reports on the seventh of the month, your credit report may be updated. But if you have a couple of credit card accounts that report later in the month, you may get yet another update.
You should monitor your credit report, or at least your credit score, on the monthly basis. This will give you an opportunity to spot any errors or new derogatory information. It’s important to discover this information as soon as possible, which will put you in a better position to correct an error before it becomes too old to dispute.
Another increasingly important reason to monitor your credit report on a regular basis is the potential for identity theft and fraud. This is one of the fastest growing crimes in America, and it can often be detected by regularly reviewing your credit report.
For example, you could check to see if any other names or Social Security numbers are associated with your credit report. You can also check to see if there have been inquiries for new credit with lenders where you never applied. It’s also an opportunity to check your account balances, to make sure there are no sudden increases in loan amounts that you never authorized.
While you can detect unauthorized usage using account alerts with each individual lender, checking your credit report regularly will alert you if a new account is opened without your knowledge.
What are the Report Differences Between the Agencies
You may be surprised to learn that the information contained in your credit reports from the three credit bureaus are not identical. There are two common reasons why this is true:
- Not all creditors report to all bureaus. A creditor may report to one bureau, and not the other two.
- Timing differences. A lender may report to TransUnion on the 10th, Experian on the 15th, and Equifax on the 20th. Depending on when your report is pulled, there may be different information as a result.
This is why it’s important, whenever possible, to obtain your credit report from all three credit bureaus. That’s the only way you’ll get a complete picture of exactly what’s happening with your credit.
How to Get a Credit Report
Under federal law, you’re entitled to one free copy of your credit report from each of the three bureaus each year. You can order them from each bureau individually. Alternatively, you can order a copy of all three – also for free – through a site called AnnualCreditReport.com. They are the only source that is officially authorized to provide your actual credit reports from all three bureaus.
Free vs Paid
You can also get monthly credit reports. This can be done either through paid subscriptions with the three major credit bureaus, or through the free sources listed in the next section.
If you want completely accurate information from official sources, the paid versions are the way to go. You can get your actual (monthly or continuous) credit reports from the three bureaus themselves:
- TransUnion, $19.95 per month.
- Experian, $24.99 per month, but covers all three bureaus.
- Equifax, $19.95 per month, but covers all three bureaus.
How to Get a Free Credit Report
We’ve already mentioned getting annual reports from all three bureaus from AnnualCreditReport.com, but there are other sources. For example, some financial institutions may provide you with a copy of your credit report each year, free of charge. But you’re also entitled to a copy of your report anytime you apply for a loan, particularly if your application is declined.
But there are also sources that will provide what you might call parallel credit reports. That is, they’re not your official credit reports, but they offer substantially the same information.
One such source is Credit Karma. They’re actually a credit score monitoring service, providing your VantageScore3.0 from TransUnion and Equifax. But with the scores they also provide the credit details that make them up. This information is very close to what you will find on your official credit report.
At a minimum, you can use the information provided to detect errors and delinquencies, which you can then either correct or dispute.
When Things are Wrong on the Credit Report
If something is wrong with your credit report, it will not necessarily be an easy fix. The three credit bureaus are notoriously difficult to communicate with. That’s true whether you attempt to contact them by phone or by email.
Unfortunately, when it comes to credit reports, the burden of proof is on you, the consumer, not the reporting lenders. If the information is reported in error, it’s up to you to get it corrected.
The best way to do this is to dispute the information directly with the reporting creditor. If you can prove to the creditor that the information is incorrect, they should report the corrections directly to the credit bureaus. That will spare you a very complicated process of going through the credit bureaus yourself.
How to Dispute Items on Credit Report
Let’s say you determine that a creditor is showing a past due balance on an account that you paid off and closed out more than a year ago. How can you go about disputing the incorrect information reported?
Start by calling the creditor directly. Find out who it is you need to speak to, to get the situation resolved. In any conversations you have with any creditor, get names, titles and phone numbers of the people you speak to, or will need to speak to.
Any dispute should be started with a phone call. But that should be followed up by either a letter or an email, recapping your understanding. The idea is to create a paper trail of the entire process. You will need that paper trail if things don’t go well.
Explain the situation to whoever you speak with, and then ask the procedure for correcting the misinformation. In most cases, the creditor will not simply take your word for it. You will have to provide documentation proving your point. For example, if the creditor is showing a past due balance long after the account has been closed out, you’ll need to provide a copy of the payment showing the balance had been paid.
Send an email to the creditor, and attach copies of your supporting documentation. Request that the error be corrected. Most important, request that they report the corrected information to all three credit bureaus.
What if the Creditor Doesn’t Report the Corrected Information to the Bureaus?
In most cases, they will. But if they don’t, you may have to send copies of your communications with the creditor, as well as your supporting documents, to each of the three credit bureaus. The creditor will then have 30 days to respond to the credit bureau, and if they don’t, the bureau will automatically correct the information on your report.
But be aware that the information may not be corrected on your report for an additional 30 to 60 days. Unfortunately, credit report changes don’t always happen quickly.
Under extreme circumstances, such as when the amount of the error is particularly large, or is having an especially big negative impact on your credit score, you might have to engage the services of a credit attorney.
It may cost you a couple hundred dollars for the attorney, but credit issues can often be resolved simply by a letter to the creditor on attorney letterhead.
How to Freeze Credit Report and What are the Laws
A situation even more severe than credit report errors is fraudulent credit. That’s where someone steals your identity, and uses it to obtain credit.
It’s bad enough that the thief can obtain a single loan or credit line in your name. But what complicates the problem is the potential for the thief to apply for several loans. That’s why you’ll have to freeze your credit report at the first sign of identity theft.
A credit report freeze (or security freeze) lets you restrict access to your credit report, making it more difficult for identity thieves to open accounts in your name. By freezing your report, creditors will not have access to it, which will prevent the thieves from getting new loans.
The credit report freeze will remain in place until you lift it. You can do that either on a temporary or permanent basis, depending on your circumstances. If you request the freeze be lifted, the credit bureau must do so within one hour of your request.
Fortunately, all three credit bureaus provide for a credit report freeze. And under federal law, it’s now free to do so. You can do a credit report freeze by contacting each of the three bureaus at the contact information below:
- Equifax, or by phone at 800-685-1111.
- Experian, or by phone at 888-397-3742.
- TransUnion, or by phone at 888-909-8872.
As you can see, there’s a lot that goes on with your credit report. Not only does the report generate your all-important credit score, but it also provides a continuous record of both the activity and health of your credit.
For that reason, you need to monitor your credit on an ongoing basis. That can be either by subscribing to a monthly credit report service, or a credit score monitoring service, that provides nearly equivalent information.
Either will enable you to spot errors, or even potential identity theft. And just as important, it will help you to keep a close eye on your credit, to make sure it’s heading in the direction you want it to.
Check out one of the services listed in this guide, and be sure to check on your credit on at least a monthly basis. At a minimum, that will prevent small problems from turning into big ones. And if that’s all you do, mission accomplished!