Credit reports are maintained by the three nationwide consumer reporting agencies (Equifax, Experian and TransUnion). Credit bureaus provide information to lenders, insurers and businesses that make credit decisions, such as credit card issuers, mortgage lenders and auto loan companies. The credit information provided is used to help them determine whether or not to extend a consumer credit, determine the terms of that credit and to help establish creditworthiness. In addition, other businesses use credit reports to decide whether or not to offer an applicant insurance; rent a house, apartment or car; or provide cable TV, internet, phone and utility services.
While the content of credit reports varies by credit bureau, they all typically include some of the same basic information. Among other things, these reports contain information about the borrower, their accounts and their inquiries.
Generally, credit reports are compiled from data collected by creditors and public records. The information in the report includes personal details like the borrower’s full name and any variations (such as nicknames or surnames used prior to marriage), addresses, date of birth and phone numbers. The report also contains a summary of the credit history, including the number and types of accounts (credit cards, retail accounts, installment loans, finance company accounts and mortgages) and the balances on those accounts. Credit reports may also list the status of those accounts (closed or open) and, in the case of Experian’s credit reports, details about the payment histories on those accounts – going back seven years.
Every credit report also includes a list of inquiries, or requests for a consumer’s credit from businesses. These are categorized as either hard or soft inquiries. Hard inquiries remain on credit reports for two years and can impact scores, while soft inquiries don’t. The report also lists all of the individuals or entities that have requested a consumer’s credit report, along with their contact information.
Finally, a credit report also lists public records that are available for all to see. These might include court judgments, bankruptcy filings and collections activity, such as unpaid child support. Often, the information in these sections is not used to calculate a consumer’s credit score, but rather to identify the potential for fraudulent activity or to verify a consumer’s identity and address.
A consumer’s credit report also contains a list of accounts that are identified as open, but that have not yet been closed. This can be anything from that department store credit card you forgot to call and cancel to a paid-off but never-closed auto loan. Open accounts aren’t good for a credit profile and should be closed.
It is important to check and update your credit report on a regular basis. This can help you identify errors and take steps to correct them before they lead to embarrassing or costly mistakes, such as those that could delay a loan application or cause a lender to offer you a higher interest rate than what you would have received otherwise.