Credit Reports: Everything You Need to Know

Woman ponders credit reports

Credit reports. You seem to hear about them everywhere – on commercials,  in advertisements for auto financing, for retail and credit cards, and even when you apply to rent an apartment. 

But what is a credit report, and who makes them? What shows up on your reports, and what should you look for? How does your report affect your life? 

Prosper answers these questions and more to help you understand your reports. By analyzing the ins-and-outs of your report, you can learn to monitor your credit and collections accounts, access free reports from all 3 bureaus, and leverage your knowledge to make the most of your credit.

What is a Credit Report? 

A credit report is a detailed record of an individual’s credit history – aka, how you manage and pay your debts. Credit bureaus prepare reports that collect financial information about individuals, including a history of how you handle your credit accounts, how much debt you carry, and how long your credit accounts have been open. 

Lenders and other credit companies use credit reports to determine loan applicants’ creditworthiness. By analyzing your previous credit patterns and borrowing experience, lenders can make more informed decisions about how much money to lend you and at what terms. 

Credit reports are also used to calculate your credit score, verify your identity, and for other, federally regulated purposes. 

Who (or What) Makes Credit Reports? 

In the United States, there are three major reporting bureaus: Equifax, Transunion, and Experian. These national credit bureaus collect and maintain information about consumers’ personal financial details and their bill-paying habits to create unique reports. 

Although most of the information in your credit file at each credit bureau is similar, there are often minor differences among the three reports. This is because each bureau organizes data differently and format their reports their own way. 

It is important to remember that credit files are living documents. Your credit file – and therefore your report – is constantly updated with the latest information reported by lenders and other companies to the credit bureaus. 

Credit reports contain critical data  found in the credit files maintained by Equifax, Transunion, and Experian. However, your report does not contain all the information the bureaus have in your credit file. In addition, there are strict federal and state laws in place to limit who can check your report, when they can check it, and why. 

Related: What is a FICO® Score?

What Shows Up? 

Although reports from the three credit bureaus are all a bit different, all reports are divided into four sections: 

  • Personal Information: The first section of your report contains all your personal information, including:
    • Your full name, along with any other names you may have used to obtain credit. 
    • Your current address and other addresses you’ve provided to open credit accounts. 
    • Current and past employers. 
    • The names of any other people with whom you jointly applied for credit. 
  • Credit Accounts: The second section of your report includes information about all your credit accounts, including:
    • All open credit card accounts, loans, and up to seven years of payment records for each. Your credit report also lists your late payments, and by how much time they were late. 
    • Closed accounts, including any paid-off credit card accounts and loans that either you or the credit issuer closed . Closed accounts stay on your report for seven to ten years. 
    • Credit accounts that were sent to collections, including foreclosures and repossessions. 
  • Credit Inquiries: The third section of reports tracks entities’ requests for your credit report or credit score. Companies and individuals typically have to pay the credit bureaus for your report- which is how the bureaus make money. On most reports, inquiries are split into two sections:
    • Hard inquiries are report requests associated with new credit, credit card, and loan applications. 
    • Soft inquiries include other reasons, including prequalification for a loan or a creditor with whom you have an established account checking your report. 
  • Public records: The fourth section of your report lists any bankruptcies, judgments, and tax liens in your name. These public records stay on your report for 7-10 years. 

What Should I Look For In My Report? 

When you review your credit report, be sure to keep an eye on the following: 

  • Your accounts. Make sure you recognize every single account listed on your report. If there are any unfamiliar accounts, contact the account lender to begin a fraud investigation. Your lender can tell you how to file a dispute on your report or freeze your report. 
  • Your account status. Call your lender if there is a discrepancy, then initiate a report dispute. 
  • Your credit utilization ratio on each credit account. You can calculate your overall utilization ratio by dividing the sum of all your balances by the sum of all your credit limits. Try to keep your credit utilization ratio below 30% overall.

When Should I Request a Report? 

If you plan to apply for a major line of credit, like a home mortgage or an auto loan, you should check your reports two to three months prior. It is also a good financial habit to request a free report once a year – either around the new year, your birthday, or other milestone. You can get a free report every 12 months from each of the three credit bureaus. 

In addition, under the Fair Credit Reporting Act, you are also qualified to receive additional reports if you are denied credit, employment, or insurance on the basis of your report. 

Why Does My Credit Report Matter? 

The information in your report determines your credit score and your overall creditworthiness – factors that can make or break your financial reality. 

When you understand your report and its contents, you can leverage your borrowing power and borrowing terms. Prosper offers products and services tailored to our client’s needs, whether you’re working to raise your credit score, apply for a personal loan or consolidate your debt. 

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