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Your Credit Report
What is a credit report?
Your credit report tracks your bill paying habits, or credit history. A credit report lists your car loans, credit cards, mortgages, school loans, and all other loans you borrow from a bank or finance company. The credit report also tracks rent payments and severely delinquent bills that get turned over to collection agencies. This is why utility, medical and phone bills sometimes appear in a credit report. Information from public records such as bankruptcies and unpaid tax bills also appear in a credit report.
Why is a good credit record important?
Think of your credit report as a second resume or a school report card and you begin to understand its importance. The credit report details your credit history and financial reliability. Your credit report determines if you qualify for a loan and what your interest rate will be. The better your credit history, the lower your interest rate.
Who looks at my credit report?
Your bill-paying habits will be reviewed anytime you apply for a loan or credit, an apartment, some jobs, and insurance. Rent disputes with former roommates that leave the landlord short are likely to appear in your credit report and damage your credit history. Unpaid bills for the computer you bought after opening a store charge card are also likely to appear in your credit report. The key to maintaining a good credit history is to repay your loans on time. Negative information will remain in your report for seven years. Bankruptcies remain 10 years.
How do I get a copy of my credit report?
Order copies of your credit report once a year to ensure they are accurate. You can call each of the three national credit-reporting agencies because each may contain different aspects of your credit history, or you can contact the Annual Credit Report Service for one free credit report each year.
If you have been denied credit in the past 60 days, the credit-reporting agency that sent the report to your prospective creditor must provide you with a copy of the report for free. However, it will not be sent automatically so you have to request a copy from the credit-reporting agency.
Do you know your credit score?
If not, it's time to find out. Credit scores have come to play a critical role in today's world. They not only help lenders determine whether to give you a loan and at what interest rate, but they also are used by potential employers, landlords and insurance companies to assess your financial health.
A recent report from the Government Accountability Office found that while many consumers are familiar with the basics of credit reports and scores, they don't always know how their financial behavior can affect their credit score. Following are some key facts about credit scores that you should know:
- Credit scores are calculated from a consumer's payment history, length of credit history, new credit, types of credit used, and amounts owed. The combination of each of these areas is what makes up the overall score, which range from 300-850.
- The score is an objective measurement of credit risk based on information in your credit reports, so it's important for consumers to review those reports at least annually to check for errors.
- A high credit score indicates strong creditworthiness, and that qualifies you for better interest rates on your loans – whether they are mortgage loans or credit card loans.
- Maxing out on your credit lines and paying bills late will lower your credit score.
- The impact of a credit score on a borrower's interest rate can be significant. For instance, a borrower with a score of 760 could pay three percentage points less in interest on a mortgage than someone with a score of 560. Lower interest rates also mean lower monthly payments.
Find more information about Credit Scores. (PDF)
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