What You Need to Know About Credit Reports and Credit Scores

Credit reports are an individual’s personal credit and financial history.  Credit reports contain many different pieces of information about an individual which is all looked at together to determine a person’s credit score.  Therefore, a credit score is the number that reflects the information on an individual’s credit report.  You cannot have a credit score without a credit report so let’s get a better understanding of credit reports and then we will go into further detail about credit scores.

Credit Reports

As we have established, credit reports are your personal credit and financial history.  Credit reports include many different pieces of information including identity, existing credit, public record, and inquiry information.  The identity section includes information such as your name, date of birth, social security number, address, and employment information.  The existing credit section contains things having to do with your credit cards, mortgages, car loans, and any other kinds of loans including detailed information regarding the terms, amounts, and history of payments.  The public record section details information regarding any court judgments, tax liens, and bankruptcy filings.  The inquiry section is a list of any and all companies that have requested a copy of your credit report.

A credit score is extremely important.  It shows how responsibly you manage your financial responsibilities.  There are a lot of things in your life that could depend on having a good credit report because there are many different people who will look at your credit report to make decisions regarding things that affect that your life.  Lenders will use the information on your credit report to determine whether or not to grant you a loan and if so the terms for that loan.  Some insurance companies will use the information from your credit report to determine the rates of insurance.  Employers use credit reports, with permission, to make a decision on whether to hire you.  Landlords will use the information to determine whether or not to rent to you. 

Now that we know what information is contained in a credit report and why it is important the next step is to understand who collects the information and creates the reports.  There are currently three major credit bureaus.  These are Equifax, Experian, and TransUnion.  They are the ones that gather all the information contained in the report and provide the report when requested.  Because there are three major bureaus you have three credit reports. 

These credit bureaus get the information in each credit report from various sources including your creditors (credit card company, finance company, mortgage company, etc) and public records.  It is important to note that because each of the three credit bureaus gets information from different sources your credit report may be different for each credit bureau. 

It is important to note that access to your credit report is limited.  This is important because of the sensitive nature of the information contained in the report.  Access to credit reports are generally limited to lenders whom you are seeking credit or have granted you credit, utility and telephone (cell) phone companies, your current or prospective employer with your consent, insurance companies that have or may issue you an insurance policy, government agencies regarding the status of government benefits, and anyone else with a legitimate business need for the information.  You can also ask the credit bureaus with written request to release your report to a third party.  Credit bureaus will also release reports by court order or subpoena.  You, of course, also have access to your credit report.  You can receive up to one free credit report from each bureau every twelve months by going to www.annualcreditreport.com or calling 877-322-8228.

Like with anything in life credit reports are not perfect and mistakes can show-up.  This is why it is extremely important that you monitor your credit reports throughout the year by requesting the free ones you are entitled to.  If you notice a mistake on your report you will need to dispute the information and request that it be deleted or corrected.  To do this, you will need to work with the bureau reporting the information and/or the company or person that provided the incorrect information.

Credit Scores

As stated above a credit score is the number that reflects the information on your credit report.  This score is a summary of your credit history and helps lenders predict how likely you are to repay a loan and make payments on time.  A credit score affects whether a lender will grant you credit, the terms offered for the credit, and the interest rate offered.

There is lots of information that goes into calculating a credit score.  This information includes the number and type of active accounts, if the bills are paid on time, how much available credit is being used, if there are any collections against you, the amount of outstanding debt, and the age of the accounts.  There is a very complicated calculation done by the bureaus that takes all this information into account and computes the credit score. Any changes to your credit report can affect you credit score.  This is why it is important to monitor your credit report. 

It is a little more difficult to get a copy of your credit score for free than your credit report.  One way to get it for free is to ask a lender for a copy of it when applying for credit.  If this is not possible than you will most likely have to purchase you credit score by contacting the credit bureaus directly.   You can find the contact information for these bureaus at the end of this article.  It is also important to note Experian has recently put in place a policy not to grant individual’s requests for their personal credit score.

Bureau Information:

Equifax:  1-800-685-1111 or www.exquifax.com

Experian:  1-888-397-3742 or www.experian.com

TransUnion:  1-800-493-2392 or www.transunion.com