Credit Reports 101: Here’s Everything You Need to Know

credit reports

The topic of credit reports isn’t one that comes up in everyday life. However, the way you handle your everyday life will affect your credit reports.

So if you find yourself feeling lost on this topic, take a seat. We’re going to go over everything you need to know about them. And when we’re finished you’ll know how to handle one of the most important aspects of your financial life.

What are credit reports?

Before credit reports and credit scores, consumers’ ability to get credit relied heavily on personal relationships. This setup was rife with potential for racism, classism, and overall favoritism on the part of lenders.

With the introduction of formalized credit reports, the focus shifted to what really mattered: your likelihood of repaying your debt.

Credit reports (which are not the same as credit scores) list your credit history, financial activity, and other personal information such as:

  • Your address
  • Your Social Security number
  • Public records (such as judgments, liens, or bankruptcy filings)
  • Accounts history, including payment history, missed payments, and collections
  • Credit inquiries

One thing it’s important to note that’s not on your credit report is your credit score. in fact, credit reports and scores are two different things; read more about the differences here. And to see an example of a credit report, check out this credit report template from Experian.

Today, a lender can pull your credit report anytime you apply for credit. However, that’s not the only time someone might check your credit report. Various versions of credit reports are also used by property management companies, landlords, insurance companies, and employers.

So even if you’re not paying attention to your credit report, there are important organizations or individuals in your life who are.

How credit reporting agencies come into play

Credit reporting agencies (also known as credit bureaus or CRAs) are the ones that control credit reports.

The “big three” credit reporting agencies are Experian, Equifax, and TransUnion. With three credit reporting agencies, that means you have more than one credit report – just like you have more than one credit score.

Creditors and lenders work with these agencies by reporting your credit activity. That’s why things like payment history are so important. If you pay late, your creditor is going to report that to the credit bureaus. That negative activity will then show up on your credit reports and impact your scores negatively.

The difficulty with having multiple credit reports is that they don’t always have the same information. That’s because “not all creditors report to all three agencies,” according to Equifax,

This is why it’s important to check your credit reports annually. You might find varied information on each report, or even errors.

For instance, perhaps your Social Security number is listed incorrectly on one of your credit reports. That’s a mix up that can lead to someone else’s credit behavior showing up on your report. Or perhaps  someone fraudulently opened an account in your name. Both of these are things you might never have known about unless you checked your credit report.

Credit reporting errors can be serious and they can take awhile to rectify. Therefore, never hesitate to do an annual check on your credit reports. The sooner you see an issue, the sooner you can get it taken care of.

How to check your credit report

The question of how to check your credit report is a tough one. It’s not uncommon to find scammy websites offering to sell you your credit report.

However, thanks to the Fair Credit Reporting Act (FCRA), you are legally entitled to your credit reports for free. The Federal Trade Commission (FTC) explains:

“(FCRA) requires each of the nationwide credit reporting companies – Equifax, Experian, and TransUnion – to provide you with a free copy of your credit report, at your request, once every 12 months.”

What’s more, this law requires your credit report to be accurate. According to the FTC:

“Both the credit reporting company and the information provider (that is, the person, company, or organization that provides information about you to a consumer reporting company) are responsible for correcting inaccurate or incomplete information in your report.”

And if the information isn’t accurate? You have the right to dispute. The FTC enforces the FCRA rules among credit reporting agencies. So you do have an ally if you encounter errors.

To get your free credit reports, go to AnnualCreditReport.com. You can request a report from all three agenciesat the same time or stagger them throughout the year.

If you need a printed copy, send an annual credit report request form to the following address:

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

How to dispute a credit report error

Now that you know how to check your credit report, let’s talk about how to dispute a credit report error. For starters, if you think the error is due to identity theft, use this FTC portal to report it.

If you’re disputing other errors, such as incorrect personal information or account history, make copies of the supporting documents you intend to send. Then keep the originals for yourself and start preparing your dispute letter.

The Consumer Financial Protection Bureau (CFPB) has an online page where you download a dispute form for the credit reporting agency (or agencies) showing the error. This page also gives you the address, phone number, and online information you need for each of the credit reporting agencies.

Once you have everything together, send the dispute via certified mail so you’ll have proof of delivery date. Once received, the credit reporting agency has 30-45 days to start investigating.

If they deem your claim to be “frivolous,” the CRA has to notify you within five business days. That means they won’t be moving forward with an investigation.

If they move forward with the investigation, it’s their responsibility to contact your creditors and take care of corrections from there. Filing the dispute with the credit reporting agency showing the error is all you have to do.

Once the CRA closes the investigation, they must send you the results within five business days.

If you’re not satisfied with the results, you can file a complaint with the CFPB. Ask the CRA involved to note in your file that you’ve disputed the information, even if they won’t remove it from your report.

How to get something off your credit report

Errors aren’t the only thing you want off your report. You should also make sure any negative items that are properly aged no longer show up on your report.

According to myFico, these negative items can stay on your credit report for seven years:

  • Late payments
  • Chapter 13 bankruptcies
  • Chapter 7 bankruptcies (can stay on your report for 10 years)
  • Foreclosures
  • Collections
  • Public records

After this length of time, if a negative item is still listed on your report, you can follow the same steps as above to dispute your credit report.

When it comes to negative entries that are accurate but undesirable, you might have heard of some ways to get them removed from your credit report. Two common strategies for this are “pay for delete” and a “goodwill letter.”

With pay for delete, you negotiate with a debt collector and offer to pay your balance if they remove the account from your credit report. With a goodwill letter – also known as late payment adjustments – you ask your lender to erase a late payment from your credit report.

However, both of these strategies violate the Fair Credit Reporting Act, which requires fair and accurate credit reporting.

In other words, you can try these strategies if you want, but they might not necessarily work. You’re better off focusing on removing errors from your report, maintaining timely payments, and keeping debt balances low. Those practices are what will be best for your report and score in the long run.

Why you should care about your credit reports

At the end of the day, credit reports influence credit scores. And credit scores will help creditors determine what you’re approved for and at what cost.

If you want to make a major purchase such as e a house or a car at a low interest rate, it’s in your best interest to have a high credit score. That means it’s in your best interest to regularly check your credit report for accuracy.

Your credit report can also influence what you pay for insurance premiums, whether or not you can get approved for an apartment, and possibly even your employment opportunities. There’s simply no way to escape the impact credit reports have on your life.

You can use this to your advantage. Check your credit reports annually, dispute any errors you might see, and work to get the best credit score you can. Then you can be sure that you’re setting yourself up for the best financial opportunities available.

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