Credit Reports - What they are and why they matter
Before we dive into the nitty-gritty of credit reports, we need to define what it is. The Consumer Protection Financial Bureau defines a credit report as “a statement that has information about your credit activity and current credit situation such as loan paying history and the status of your credit accounts.” An example of items you’d find on a credit report would be:
Personal information such as your name and aliases, birth date, social security number, and past and present phone numbers and addresses
Accounts include revolving credit (credit cards), installments (like a phone payment), auto loans, and mortgages. Information about each account status is also included such as if any of the accounts are past due, payment history, and current balances.
Bankruptcies
Recent credit inquiries. These occur whenever you apply for any of the following account types listed above.
Why is it important to review my credit report?
It’s important to review your credit report regularly to catch any irregularities. Irregularities usually occur from identity theft and fraud. Sometimes your personal information can be stolen and be used to open a credit account under your name. By monitoring your credit report, you’ll be able to see if something like this occurs and address it.
Who creates my credit report?
There are three credit reporting agencies (also referred to as Credit Bureaus) in the U.S.— Experian, Equifax, and Transunion. These reporting agencies collect the personal information of everyone who has a credit account, compiling the details from all relevant reporting sources. Through this compilation of information, these agencies determine your credit score.
Who can check your credit report?
You! - You're entitled to be able to check your own credit report. As mentioned earlier, this is how you can catch identity theft and fraud. Checking your credit report does not affect your credit score.
Lenders - Lenders check your credit report whenever you apply for a credit card, auto loan, or mortgage. These are referred to as hard inquiries. These inquiries do affect your credit score.
Landlords - A landlord is allowed to check your credit report with your permission when applying to be a tenant. Landlords are extending their property to you with your promise of payment, which is very similar to extending a line of credit. Because of this, they are permitted by law to ask for it.
Insurers - Similar to other credit accounts, insurers want to be sure that they are going to be paid when providing coverage to you. Insurers can ask for a copy of your credit report when you apply for coverage.
Employers - Employers are allowed to request a copy of your credit report when hiring for a position. You must provide written consent for them to view it any time during the application period or after you’ve been hired.
Misc. - Other valid opportunities may arise where a credit report is needed or requested. In most of these cases, you need to provide consent.
What to do when you see an inaccuracy on your report?
When you spot an inaccuracy on your report that needs fixing, you’ll need to open a dispute with the bureau that has the mistake on the report. You can do this through mail, phone, or online. You’ll need to collect supporting documents to support your claim. Credit repair agencies can handle getting this information as well. This article from the FTC has more detailed advice to follow if you’d like to pursue removing inaccuracies yourself. This article from Experian (one of the credit bureaus) provides information about credit repair agencies.
Now with all of these tips, don’t be afraid to look at your credit report! Monitoring your credit report (and other finances) can help you make the best decision possible when one needs to be made.
We hope over the past 5 weeks (yes, we had 5 weeks in April (I was shocked too), we’ve provided actionable financial advice or taught you something new.