What Is a Credit Report?

A credit report is like a snapshot of your financial history. It includes all the information potential lenders need to determine if you’re a good risk for a loan or credit card.

Understanding your credit report and how it works can help ensure your information is accurate and your credit score is as high as it can be. This guide will walk you through everything you need to know about credit reports, including what they are, how to get one, and how to read them. Let’s get started!

Table of contents

• How do credit reports work?
• What goes into your credit report?
• The difference between credit reports and credit scores
• How to read your credit report
• Bottom line to credit reports

How do credit reports work?

A credit report is a document that contains information about your credit history. This includes things like whether you’ve ever missed a payment, how much debt you have, the types of credit accounts you have, and whether you’ve ever declared bankruptcy.

Your credit report is used by lenders to help them decide whether to approve you for a loan or credit card. It can also be used by landlords, employers, and insurers.

While your credit report never includes data about your income, net worth, or current employment status, it may list your employment history. These details are simply used by providers to confirm your identity; it never gets factored into your credit score.

Some items “fall off” your credit report over time. For instance, any late payments you make disappear after seven years, and bankruptcy drops off after seven to 10 years. This is good news for anyone whose credit report isn’t as strong as they’d like it to be — with time, things can get better.

Credit report factor	How long it stays on your credit report
Late payments	7 years
Hard inquiries	2 years
Soft inquiries	2 years
Chapter 7 bankruptcy	10 years
Chapter 13 bankruptcy	7 years

How is a credit report generated?

A credit report is generated using your “credit file.” This is a new concept, so let’s take a closer look at what it means.

Each and every month, your credit card companies send your account data to the three credit reporting agencies — Experian, Equifax, and TransUnion. These three agencies then take all this information and load it into your credit file.

Think of your credit file as a large, digital filing cabinet. It houses anything and everything related to your credit history, no matter how old. This includes all the details you’ve ever given on credit card applications, addresses associated with your credit accounts, all the late payments you’ve ever had, and so on. It’s the whole enchilada.

Then, when you or a company requests a copy of your credit report, the three credit bureaus pull all the relevant information from your credit file and compile it into an easy-to-read credit report. In other words, they leave off all the items that have since “dropped off” your file.

Who uses the information on your credit report?

If you’re like most people, you probably think of credit reports as something only potential lenders look at (for example, when you’re trying to get approved for new credit or a low-interest rate with the best mortgage lender).

But did you know that your credit report can have a big impact on your life — even if you never plan on financing debt? For instance, your credit report can also be used by:

• Landlords when considering whether or not to rent to you
• Employers when deciding whether to hire you
• Insurance companies when calculating your premiums for home and auto insurance

So maintaining a healthy credit score is important, even if you live a debt-free lifestyle.

What goes into your credit report?

When you apply for a credit card or loan, the lender will check your credit report to evaluate your creditworthiness — that is, how likely you are to repay a loan on time. This data helps lenders assess your credit risk and make decisions about whether to approve your loan application.

What’s in your credit report?

The information in your credit report can be broken down into four general categories:

• Identifying information: This includes your name, address, phone number, date of birth, Social Security number, and employment history.
• Credit history: This is a record of your credit card accounts, including the date each account was opened, your credit limit, your account balances, and your payment history.
• Credit inquiries: This is a record of who has accessed your credit report, including lenders, employers, and landlords. There are two types of inquiries: soft inquiries and hard inquiries. Soft inquiries don’t impact your score, but hard inquiries may ding you a few points until they disappear.
• Public record information: This is any negative information reported on you, such as bankruptcies, foreclosures, tax liens, and credit accounts sent to collection agencies.

The difference between credit reports and credit scores

When it comes to managing your finances, your credit report and credit score are two of the most important tools at your disposal. But what’s the difference between the two?

Credit report vs. credit score

Your credit report is a detailed history of your credit activity, including all the loans you’ve taken out, the credit cards you’ve used, and whether you’ve made your payments on time.

Your credit score, on the other hand, is a three-digit number that’s designed to give lenders a quick way to assess your creditworthiness.

While your credit report is the more comprehensive source of information, your credit score is generally more important when it comes to making decisions about new loans and lines of credit. That’s because your score is an easy-to-understand measure of how likely you are to repay any debt you take on.

• A high credit score means you’re a low-risk borrower, which makes it more likely that you’ll be approved for a loan with favorable terms.
• A low credit score means you’re a high-risk borrower, which makes it less likely that you’ll be approved for a loan or line of credit at all.

You can view your free credit score on sites like Credit Karma and Credit Sesame, although the numbers they provide may not precisely match the scores produced by the major credit bureaus. You may also see your score pop up on your credit card statements or loan statements.

Different types of credit reports and credit scores

Because there are three major credit bureaus, you also have three different credit reports — one from TransUnion, one from Equifax, and one from Experian.

Likewise, there are also quite a few different types of credit scores. The most common are FICO scores, which are used by 90% of lenders.

FICO scores range from 300 to 850. (The higher your score, the better.) There are also industry-specific FICO scores, which are used by certain lenders to assess risk for specific types of loans. For example, auto lenders use FICO Auto Scores to help determine whether or not you’re a good candidate for an auto loan.

Other popular types of credit scores are your VantageScore, TransUnion score, and your Experian score. Whatever type of credit score a lender is using, they all basically measure the same thing: how likely you are to repay a loan on time.

How to read your credit report

Checking your credit report regularly is an important part of maintaining your financial health. Luckily, it’s easy to do.

You’re entitled to a free credit report once every 12 months, thanks to the Fair Credit Reporting Act (FCRA). You can access your report at AnnualCreditReport.com.

Note: From now through December 31, 2022, you can get a free copy of your credit report each week. This is due to a provision in federal law that was enacted in response to the COVID-19 pandemic and its effects on the economy.

Now let’s take a closer look at how to read your credit report once you receive it.

Identifying mistakes on your credit report

Once you have your credit report, take some time to review it carefully. Look for any errors, mistakes, or signs of identity theft. These could include:

• Incorrect personal information, such as your name, addresses, phone numbers, employment history, or Social Security number
• Accounts that don’t belong to you
• Accounts that have been closed but are still showing as open
• Late payments that are more than seven years old
• Bankruptcies that are more than 10 years old
• Hard or soft inquiries that are more than two years old
• Collection accounts that have been settled but are still showing as outstanding
• Credit limits that are inaccurate

Correcting mistakes on your credit report

If you find any mistakes on your credit report, the next step is to dispute them to get them corrected. Here’s what that process looks like:

1. Contact the creditor or lender that reported the incorrect information and ask them to correct it. Be ready to provide any documentation that supports your claim of inaccuracies.
2. If your lender is unwilling or unable to correct the mistake, file a dispute with the credit reporting company. (This would be TransUnion, Experian, or Equifax.)
3. If you suspect the mistake on your credit report is due to fraud, report it to the Federal Trade Commission (FTC) at reportfraud.ftc.gov. This is the government agency that handles fraud in the U.S.

Depending on how severe your situation is, you may also need to file a police report or take legal action. If you don’t have the time or skills to correct mistakes yourself, consider looking into a credit repair company that can shoulder the burden for you.

Bottom line to credit reports

In all, your credit report is an important document that reflects your financial history. Companies use it to do everything from approving you for a student loan to giving you a good deal on car insurance.

Keeping tabs on your credit report and ensuring your information is accurate is crucial to maintaining a good credit score. You can request your free credit report at AnnualCreditReport.com.