Credit Report

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Credit Report

What Is a Credit Report?

A credit report is a thorough examination of your credit history provided by a credit bureau. Credit bureaus gather financial information about you and use it to build credit reports, which lenders use together with other facts to establish your creditworthiness.

There are three main credit reporting bureaus in the United States: Equifax, Experian, and TransUnion. To build a unique credit report, each of these reporting firms gathers information about your personal financial facts and bill-paying history. Although the majority of the content is identical, there are often minor discrepancies across the three reports. 123

Key Takeaways

  • A credit report is a comprehensive overview of your credit history created by a credit agency.
  • Personal information, data on credit lines, public records such as bankruptcies, and a list of businesses that have requested to examine your credit report are all included in reports.
  • Each of the three main credit agencies, Equifax, Experian, and TransUnion, is mandated to offer you with one free credit report each year. 4

How Credit Reports Work

Personal information such as your current and prior residences, Social Security numbers, and job history are included in credit reports. These reports also contain a credit history summary, which includes information such as the number and kind of bank or credit card accounts that are past due or in good standing, as well as comprehensive account information such as high balances, credit limits, and the date accounts were created. 1

Credit reports also include information regarding credit inquiries and details of accounts handed over to credit agencies, such as liens and wage garnishments. In general, negative information on credit reports is kept for seven years, but bankruptcy filings are kept for around ten years. 4

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Advisor Insight

CLUIntrepid Wealth Partners LLC, Madison, Wis., Derek Notman, CFP®, ChFC

Make a point of reviewing your credit report before you need it. My client was seeking for a house mortgage, and when the bank searched its credit report, it found over $20,000 in credit card debt, despite the fact that the customer had no credit cards.

The customer had the same name as their father, so when the credit report was run, it retrieved their right information but also retrieved their father’s credit card amount.

Check for mistakes before you believe you’ll need to apply for credit, so you can get them repaired if any exist. Failure to do so may cause your credit decision to be delayed, your lender to reconsider providing you credit, and, ultimately, a time-sensitive transaction to be delayed.

What Information Is in My Credit Report?

Credit reports are normally divided into four components. These are as follows:1

  1. Personal Information – Your name, address, date of birth, Social Security number, spouse or co-applicant, and phone numbers are all shown at the top of the report. Because the information was reported improperly by a lender or other business, this section may include variations of your name or Social Security number in certain situations.
  2. Accounts – The second portion of most reports contains specific information on all of your credit accounts, including both revolving credit (credit cards and lines of credit) and installment loans (auto loans, personal loans, and mortgages). It will classify your accounts as “open,” “closed,” or “negative,” as well as provide information on any accounts that have missed payments, been charged off, or been sent to collection. Each account has its own entry, which is referred to as a “trading line.”
  3. Bankruptcies, judgements, and tax liens are examples of public documents under the third part. Non-financial information, such as arrests or misdemeanors, is not included.
  4. Credit Inquiries – At the bottom of the report, you’ll find a list of all the companies who have lately requested to examine your credit report as a result of an event like applying for a personal loan or requesting pre-approval for a credit card. The former is a hard inquiry, which might result in a temporary drop in your credit score. The latter is a soft enquiry that has no bearing on your score. In general, hard and soft queries are kept separate.
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Creditors, insurers, landlords, and a few others have the legal right to view your credit record if you apply for credit, an insurance policy, or a rental property. 5 Employers may also obtain a copy of your credit report if you agree and offer written consent. 6 These organizations must generally pay the credit bureaus for the report, which is how the credit bureaus make money.

Equifax, Experian, and TransUnion, the three main credit reporting agencies in the United States, offer comparable readings on clients’ financial records, although there are often minor discrepancies.

Special Considerations

Each of the three credit reporting agencies is required by the Fair Credit Reporting Act to provide you with a free credit report once a year. If a corporation has taken unfavorable action against you, you are also entitled to free credit reports under federal law. This includes credit, insurance, or employment denials, as well as collection agency reports or judgements. 4 However, you must seek the report within 60 days after the occurrence of the unfavorable action. 7

Furthermore, customers on poverty, jobless persons who intend to seek for work within 60 days, and victims of identity theft are all entitled to a free credit report from each of the reporting agencies. 4

If you want to restore your credit, there are firms that can negotiate with your creditors and communicate with credit bureaus on your behalf. Scammers exist in the sector, so do your homework to ensure you’re working with a trustworthy credit repair organization.

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