When you’re ready to take a big step like buying a home or leasing an apartment, your credit report becomes much more than just a little piece of paper stored on file. Your report is the key to unlocking new opportunities that are available only to those with favorable credit scores.
The contents of a credit report include information about your financial history, credit account status, and loan repayment history. These financial history statements are used by lenders to determine whether they will lend you money and at what interest rate they will do so. Credit reporting is also used by lenders to determine whether you are complying with existing loan agreements.
To get the most out of these details, you need to understand their meaning and how they can be used. To ensure that your consumer financial future continues to look bright, we’ve put together this article about what’s in your statement and how it impacts your life moving forward.
What Is a Credit Report?
Your credit report is a detailed analysis of your financial history, which helps potential lenders determine whether you’re likely to repay a loan. It also indicates how likely you are to become delinquent on a debt. Consumers who take the time to check their details and correct any errors early on can avoid many problems down the road.
It’s essentially a record of your financial history. And is a compilation of details about your financial past, including information about if you pay your bills on time, if you have any outstanding debts or if you have applied for a new loan recently.
It’s important to check your file regularly because it can alert you to potential identity theft and other red flags that may indicate an issue with your credit. Knowing what is in your statement – and how it can affect you – will help you take control of your consumer financial future.
How Do Credit Reports Work?
This type of financial information is instrumental in helping lenders assess the risk of lending money to a prospective borrower. Credit reporting provides an overview of a person’s financial history, including any history of bankruptcy, loan defaults, negative information, or court judgments related to unpaid debt. With this information, lenders can make informed decisions about extending credit.
If you’re applying for a loan—whether it’s to take out a car, buy a house, or even just rent an apartment—the lender will likely perform a detailed analysis of your creditworthiness before offering you financing. This means they will check your score and do other checks to see how risky it would be to lend you money. This is because lending money comes with risks for the lender — if you don’t pay them back on time or fail to pay them back at all, they lose their money!
What Information Is Contained in Credit Reports?
Credit reports are a record of how you manage credit, not how much you have. This information contains detailed information about your past and present financial accounts, collections, public records such as tax liens or judgments, and other background information.
So, what is a credit report? It’s a file that contains your personal information like your name, address, date of birth, and Social Security number as well as account information loan accounts (mortgages and car loans), unpaid debt (collections accounts and delinquent utility bills), and payment history for the past two years for most types of accounts (mortgages, car loans, and credit card payments). And public records such as bankruptcy filings or court judgments and any inquiries into your file within the last six months. Here’s more on what makes up your personal crediting history.
Credit scores are not calculated based only on the identifying information in your statement. But they do include several pieces of personal information that appear on it, including:
- Name: Your full name, as well as variations (such as your married or maiden name). It is important to ensure that your name, middle name, and/or previous name are all listed correctly.
- Current and former addresses: Your current and previous addresses. It is important to ensure that all of your previous addresses and listed correctly. Ensure to check the dates are correct too.
- Birth date: Your date of birth. This includes the exact day, month, and year you were born.
- Social Security number: Your Social Security number. To have a credit report, you will need to have a social security number.
- Phone numbers: Your telephone number. In most cases, this will only be your primary telephone number. Cell phone numbers are allowed.
This information is provided by your creditors and lenders to a financial agency. It includes your loan limit, loan amount, account balance, payment history, and the types of accounts you have (such as personal loans, home loans, and vehicle loans). Your details may not include all of your financial accounts due to closed accounts and non-reported accounts.
- Current and historical credit accounts: Items such as mortgages, installments, revolving accounts, etc. Plus previous and current accounts
- The credit limit or amount: This will include the amount of credit you have available with other lenders
- Account balance: This includes any outstanding loans or debts
- Account payment history: Includes all payments made on loans and lines of credit, current and previous
- The date the account was opened and closed: This will include the date any of your credit accounts were opened. If you have closed accounts, the date of these will also be detailed
- The name of the creditor: Any company with which you have a credit account will be included here
It is possible for a lender or creditor to transfer your account to a collection agency or sell it to a debt buyer if you fall behind on payments. A credit card, a hospital account, a bank account, a retail store account, a cable account, or a mobile phone account are all examples.
After you miss a payment or fail to pay the full minimum payment, this generally happens a few months later. Usually, lenders and creditors will contact you before sending a debt to a collection agency. It is possible that you will not be notified if your account is being sold to a debt buyer. Your debt will then be collected by a collection agency or debt buyer. A credit statement contains this information to inform prospective lenders if you have had trouble with borrowing and how you have handled previous repayments.
Public credit reporting contains Electoral Roll records, judgments, insolvencies, and correction notices. Data of this type is frequently viewed by employers, landlords, and lenders during financial checks – it serves primarily as proof of your identity.
- Liens: Liens are used by creditors to stake a claim on assets you are using to secure your debt. As of 2018, IRS or tax liens are no longer included on your financial report- which means they can’t affect your score.
- Foreclosures: When the lender initiates foreclosure proceedings, your file will typically reflect it within a month or two. After the first missed payment that led to foreclosure, the entry remains on your file for seven years.
- Bankruptcies: Public bankruptcy records are included in your file, along with details about the bankruptcy filing date and chapter (type of bankruptcy).
- Civil suits and judgments: Currently, a civil judgment does not appear on a consumer financial credit report and does not affect your credit score.
Inquiries made by a hard inquiry are those made when a company or individual, such as a loan servicer, or finance company, reviews your file as a result of your application for loans- such as a new credit card, or phone contract, or any type of loan. These hard inquiries remain on your file for up to two years and can negatively impact your credit scores.
You may incur soft inquiries if you check your own statement, if companies extend you pre-approved credit or insurance offers, or if your current lenders or creditors conduct periodic accounts reviews. Credit scores are not impacted by soft inquiries. And if you regularly check your credit reporting, you can identify any inaccuracies or incomplete information, as well as suspicious activity that may indicate potential identity theft.
What Information You Won’t Find on Credit Reports?
Credit reports do not contain personal information about you beyond your name, address, and other identifying information. They don’t include things like your sexual preference, hobbies, political affiliations, religious beliefs, or family members. It doesn’t contain any criminal records or arrest information, either.
Additionally, your file doesn’t include details such as your college graduation date or the year you finished high school. It also won’t tell potential lenders your marital status, income, level of education, criminal record, or transactional data.
Your file also cannot include personal information regarding your medical history. That means lenders cannot see if you have diabetes, cancer, heart disease, or any other medical conditions that could affect their risk of extending your credit.
Credit reports do not include salary information. Your salary is often taken into account by lenders during the application process, but it does not appear on your file. The scoring systems are based solely on financial history and do not take salary into account.
Salary information hasn’t been included in financial reports for more than 20 years. Salary information was no longer collected by finance companies because it was self-reported and often inaccurate. This may be viewed negatively by some.
For example, if you have a decent or above-average wage or have recently earned a raise, this will make you seem like a more reliable borrower. If you have a frequent income, you are more likely able to keep up with repayments.
If you are applying for loans and do not have an established work history yet, your employment status won’t appear on your file. The information about your employer would appears on your statement only if you submitted it while applying for a loan, credit card, or finance deal. Your salary, location, and length of employment are relevant to the qualification process.
An accurate picture of your consumer financial situation and source of income is necessary for the lender to evaluate risk and your ability to repay the loan. But, your employment status does not feature on your file in any shape or form. The good news is that this can give you an advantage when applying for loans if you are looking to get one soon.
Marital Status and Spouse’s Credit History
Since the national credit bureaus do not include marital status in their records, marriage has no effect on your file or credit scores. Before and after your wedding, your payment and borrowing history remains the same. An individual’s score is a measure of the health of their file as a whole.
Credit Reference Agencies do not share your marital status, so it won’t appear on your financial report. Therefore, marriage (or divorce) does not directly affect your score. This could mean bad news for those with a bad borrowing history. A good score from your spouse may offset your low score, for example, if your low score affects your borrowing ability.
In addition to delinquent accounts and credit inquiries, financial reports do not include details about assets and cash flow. In order to establish creditworthiness, this information does not include bank accounts (without overdrafts) as they have no credit facilities. Information about your bank account is not included in your file, nor does it affect your finance score.
However, lenders can gain a better understanding of how you manage your finances, as well as whether you possess the resources to repay your debt, by including information about consumers’ financial assets. Financial institutions may extend credit more readily to those with thin or no credit files if they know a person has a substantial balance in their savings account.
Your credit report does not include information about retirement accounts, such as 401(k)s. Nevertheless, lenders will ask you about such loans if you are applying for a mortgage. Additionally, borrowing from your own 401(k) doesn’t require a credit check, so it won’t affect your score. Defaulting on a 401k loan will not affect your credit score and will not be reported to credit bureaus.
It may be possible for a lender to extend credit beyond what is reasonably repaid without knowing 401(k) information. The consumer may not always benefit from this. Denial of credit may cause short-term financial pain, but in the long run, it may strengthen people’s finances.
How to Get Your Free Credit Report Information
Equifax, Experian, and TransUnion are the three main credit agencies. The credit score you receive from different sites may vary – but that’s normal. Several factors can affect your financial score. The information on your file varies depending on how frequently they update it and how far back they dig into your financial history. Each agency calculates its personal score using different risk models, resulting in different scores based on the model used.
For example, when you check your free score with Equifax, they use their own proprietary model, the Equifax Beacon 5.0. However, Experian provides your personal score based on the Fair Isaac Risk Model v2, while TransUnion uses the Risk Score 04 model. Equifax, Experian, and TransUnion each provide you with a free statement every 12 months. You can request a copy from AnnualCreditReport.com.
Why Should You Check Your Credit Report?
Credit reporting is a snapshot of your financial history. It’s packed with details about your accounts, loan applications, addresses, and payment history. Unless you check your own file regularly, there might be instances when someone with malicious intentions gets access to it without your knowledge.
When that happens, it can have a negative impact on your consumer’s financial future – because a personal statement affects so many important things in life like getting a loan, renting an apartment, or even getting hired for a job. Checking your file once in a while is important to make sure that the information listed is correct and up-to-date.
Even if you don’t think anyone would have malicious intentions when accessing your file, accidents happen all the time. An authorized user on an account could give their personal details as yours or vice versa. You never know who might try to take advantage of you.
How to Check Your Credit Report?
A regular financial check should be on your to-do list if you wish to manage your money effectively. You should check your personal record regularly so that you can correct errors, identify signs of identity theft, and make sure your score is reasonable.
The three major credit reporting agencies: Equifax, Experian, and TransUnion are authorized by federal law to provide free copies of your financial information. These agencies are required to provide one free statement to you each year by law.
If you’re using an Annual Credit Report, you can start the process just by clicking “request your free credits report”. You must provide some identifying details to the website you’re on in order for your personal file or score to be pulled. This includes your name, birth date, Social Security Number, current address, and previous address.
To verify your identity, you will have to answer some questions. You are the only person who knows the answers to these questions. Your financial record or score will appear after you have verified your identity. Take a close look at the information. Each reporting agency can be contacted if you notice inaccurate details.
What to Do if You Find Errors on Your Credit Report?
If you find an error on your personal file, you can dispute it by contacting both the reporting company and the company that provided the details. You need to contact them in writing and include the following information:
- Attach a copy of your file containing the disputed items, circled or highlighted. Documents supporting your position should be copied (not originals)
- Any error you are disputing should be clearly identified
- Information about you, including your address, phone number, and email address
- Explain why you disagree with the information
- If available, the confirmation number for the statement
Keep written records of everything you send, including the agency’s dispute form (if it exists), and make sure to make copies of evidence supporting your dispute.