A credit report is a record of your credit activity and current credit situation. It details information about your loan history, debt, account balance, account payment history, and more.
In this guide, we’re answering everything you need to know about what is a credit report and why is it important.
Table of Contents
What is a credit report and why is it important?
A credit report is a document that contains information about how you use credit. Credit reports contain your personal information as well as your payment history, past loans, outstanding loans, account balance, credit limit, account dates, and names of creditors. They also include information on where you live, any legal judgments you have against you, foreclosures, liens, and whether you’ve ever declared bankruptcy.
Credit reports are essentially an all-encompassing view of your credit situation. They are used by lenders to decide whether or not to issue you a loan. Some landlords may also review your credit report to determine whether to accept you as a tenant.
If you have plenty of positive remarks on your credit report, such as the history of on-time payments and paid-off loans, banks and lenders are more likely to see you as a responsible borrower.
However, if you have too many negative items, such as a foreclosure or multiple missed payments – banks and lenders will be more hesitant to work with you. This can make it harder to get loans for buying a home, going back to school, opening a new credit card, or even renting an apartment.
The items on your credit report make up your credit score. Your payment history, the amount of available credit you use, and the age of your accounts all go into calculating your credit score. The more positive items on your credit report, the higher your credit score.
You’re entitled to a free copy of your credit reports once every 12 months. Visit www.annualcreditreport.com to access your free credit report.
What are the 5 credit score ranges?
The most popular personal credit scores are FICO Scores, created by Fair Isaac Corporation.
- Exceptional: 800 to 850
- Very good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Poor: 300 to 579
What agencies report your credit?
Every month, creditors, banks, and other lenders submit information to credit reporting bureaus. Credit reporting bureaus collect, store, and organize this data. They ultimately issue credit reports using the information that lenders, banks, and other institutions provide.
There are laws that control how credit reporting bureaus can use and store your data. For example, under the Fair Credit Reporting Act, a credit bureau must investigate any dispute you make about an item on your report.
There are three major credit reporting bureaus: TransUnion, Equifax, and Experian. Here’s what you need to know about each credit reporting bureau.
Experian is one of the major credit reporting bureaus issuing credit reports and scores. Experian’s credit reports emphasize the expiration date on the items in your report.
Many people believe that once something is on their credit report, it’s there for life. This actually isn’t true — both positive and negative items expire over time. When you look at your Experian report, you can see exactly when an item will leave your report. This can help you determine the best time to apply for a loan.
Your Experian report should be the first credit report you view if you’ve made financial mistakes in the past and you’re itching for a fresh start. And now, you can access free tools to review and boost your credit score with Experian Boost. Learn more here.
Equifax is another credit reporting bureau focusing on providing you with easy access to your credit information. Equifax is the only credit reporting bureau of the major three that lists the status of your loans and accounts as “closed” or “open.”
This makes it much easier for you to see which outstanding accounts you still need to pay down. It’s also a great way to spot errors. For instance, you may find an account is listed as open when it’s actually closed. Equifax is a good place to start if you’re reading your credit report for the first time.
TransUnion also issues credit reports and scores, however, they go the extra mile to list each of your accounts as either “satisfactory” or “adverse.” “Satisfactory” condition means your account is either paid in full or your payments are up to date. If your account is in an “adverse” condition, it means you’ve fallen behind on payments.
Unlike other credit reports, TransUnion uses a color-coded system to tell you how late your overdue payments are. You may see a yellow, orange, or red box with a number that ranges from 30 to 120 on your adverse accounts. This is the number of days your payment is overdue.
For example, if you see a credit card loan and a red box with the number 90 in it for July, it means that your payment due in July is 90 days late. This system can be useful for helping you figure out which accounts you need to prioritize to rebuild your credit score.
Understanding your credit report
Credit reports have a lot of information on them, so breaking your credit report down into more manageable “chunks” can help you better understand what you’re looking at and spot errors.
The first step is to review your personal information on your credit report. Make sure that your name is spelled correctly, your birthdate is accurate, and your address is current.
Next, check your employment history. It may be in its own section or it may be part of your personal information, depending on which report you’re reading. If you’ve changed jobs since your latest report was issued, you may want to dispute this information.
You’ll see your accounts listed after your employment history. Accounts can include the open date, credit limit, loan amount, balance, payment terms, and history of any type of loan or credit line. Take a look at each individual account and keep your eyes peeled for the most common credit reporting errors.
The accounts section is the most likely place you’ll find misinformation on your report. Common credit report errors include:
- Accounts that belong to someone else with a name that’s similar to yours.
- Accounts listed as late or overdue that you paid on time.
- Accounts that you don’t remember creating (a common sign of identity theft).
- Accounts listed more than once.
- Accounts that you closed voluntarily listed as “closed by lender.”
The public records section includes information on legal actions taken against you. Items like bankruptcies, foreclosures, tax liens, and civil judgments appear here. Make sure that none of the information listed belongs to someone else with your name.
The last section on your credit report is the hard inquiries section. When a lender, bank, or credit card company checks your credit, it does a “hard inquiry” and views your credit report. Make sure you recognize all of the recent hard inquiries on your account. Unrecognizable hard inquiries are another telltale sign that you’re a victim of identity theft.
Need some more help understanding and dissecting the information on your credit report? A Credit Builder Plus membership from MoneyLion can help. You’ll gain access to credit monitoring tools and customized tips to help you boost your credit score.
Found an error on your credit report? Don’t panic. You can dispute items on your credit report online for each of the three major bureaus. Under the Fair Credit Reporting Act, each bureau is required to investigate your disputes — and remove them if they can’t provide evidence to back them up.
You can create an account to file a dispute with Experian or by calling the individual number listed on your credit report. Numbers vary depending on your state, so double-check before you dial.
Visit Equifax’s dispute center or make a dispute by phone at 1-866-349-5191.
To file a dispute with TransUnion, create an account with its dispute center. You can also make a dispute by phone at 800-916-8800.
You’ll need to report each error with every bureau and individually with all three bureaus if you have an error that’s present on all of your credit reports.
How can I improve my credit score?
Disputing incorrect items on your credit report may or may not have a big impact on boosting your score. Either way, it’s important to create a plan to improve your credit score. Here are a few tips to get you started.
Use a credit monitoring service
Credit monitoring services make it easy to keep an eye on your credit by alerting you to new items that appear on your credit reports. These services can help you increase your credit score by catching instances of identity theft before they can do serious damage.
MoneyLion’s Credit Builder Plus membership features our Financial Heartbeat tool and access to easy credit tracking services.
Create a household budget
If you’ve racked up large amounts of debt, it’s time to direct your finances towards paying off what you owe. This will help boost your credit score and allow you to save money on interest rates and fees.
If you don’t already have a household budget, sit down with your finances and create a plan to tackle your debt. Assign a “job” to every dollar in your paycheck and ration your money as soon as you get your next deposit. Even a single extra payment a month can do wonders when it comes to reducing what you owe.
It helps to visualize where your money is going. MoneyLion’s RoarMoney bank account features built-in spending tracking tools and automated reports to help you understand your spending habits and find ways to make cutbacks.
Consider a secured credit card
If your credit score is low, you may run into difficulty trying to open a new credit card. You may have to face higher interest rates, and some lenders may reject you altogether.
A secured credit card is a lot easier to qualify for and can actually help you raise your credit score. Secured cards require you to put down a cash deposit in order to access a credit line.
For example, if you open a secured card with $500, you’d have a $500 line of credit. The credit card company holds your deposit until you’re able to close the card. A secured card works exactly the same as a normal credit card. You make purchases, pay your bill off every month, and the credit card company reports your payments.
It’s a win-win for both you and the provider. You get to see an increase in your score and your lender gets to earn interest with less risk. Consider opening a secured card to push your credit to the next level.
Raise your credit score with MoneyLion’s Credit Builder Loan
Improving your credit score doesn’t happen overnight. However, with time, patience, and the right tools – you can get your credit score in a good place. When this happens, you’ll be able to qualify for cheaper funding solutions and access new forms of credit – like mortgages, car loans, etc.
One helpful strategy is to take out a credit builder loan. MoneyLion’s Credit Builder Plus Membership features a designated Credit Builder Loan to help you boost your credit score without the high-interest rates and fees associated with credit cards. There’s no credit check to quality and it works fast – getting you cash in your pocket and helping you work towards a brighter financial future.
Learn more about MoneyLion’s Credit Builder Plus Membership here.
Who uses a credit report?
Lenders and landlords will review the information on your credit report to evaluate your applications for credit, loans, insurance, or renting a home
Can a credit check see your bank balance?
Credit checks will inform lenders of the account balance on your credit cards and other debt products. However, they won’t be able to see the money in your bank account.
Can anyone access my credit report?
No. Only yourself and qualifying organizations with a permissible purpose are able to access your credit report.