Everything You Need to Know About Your Credit Report

What is a credit report and how to read it

Every year I make sure I give myself at least one birthday present.  Okay, usually it’s more than just one, but THIS one is the most important:

I download and review my credit report!

LOL,  bet you’re thinking “Michelle, that doesn’t sound like a present I want!”  

Okay, I get that but hear me out because I really, really want to convince you to do the same by telling you some of My Story.

Don’t Let the Bad Guys Win

In January 2018 I discovered that I was the victim of extreme identity theft.  I received a call from the police informing me that someone tried to buy a top-of-the-line BMW in my name.  Trust me, I cannot afford an expensive flashy car! 

At that point, I did exactly what I’d been told to do: I picked up the phone and called my bank and all my credit card companies and requested my current cards be canceled and new cards issued.

Two days later, I stopped getting my mail. 

To this day, I have never received my mail from January 18th - January 23, 2018.  It’s just...gone.  That’s when things got serious. 

I had to cancel the new cards I ordered and put all my cards on hold.  I  had to set as many bills and credit card statements as possible to only be delivered by email.  I pulled all three of my credit reports and found out that there had been twenty-four - TWENTY-FOUR - requests for credit cards in the previous ten days.  Which, incidentally, devastated my credit score.

This is why I am so passionate that everyone MUST know what is on their credit report, how to access it  and how to read it.  Monitoring your credit report is your first defense against identity theft and potential financial catastrophe.

What ensued is days and weeks of tracking down and closing credit cards and credit lines.  Three years later and I still periodically get calls from credit card companies asking me if I’m trying to take out a card with them.  It’s been a nightmare that I’m not sure will ever go away.

It’s also just good to know what’s on your credit report.  Let's talk about why.

 

What is a Credit Report?

Think of your credit report as your financial “report card”.   Your credit report is a record of all of your financial activity over the course of your entire life.  

Banks, credit card companies, and other financial institutions use the information on your credit report (and your credit score) to make decisions regarding whether or not they will do business with you.  This could be something as simple as allowing you to open a checking or savings account in their bank.  But, it could also be whether or not they will loan you money, for how long, and at what interest rate.  

It’s a Big Deal.

 

What is on Your Credit Report?

Your credit report contains your credit history and historical credit activity, as well as your current credit/financial situation and credit activity.  In other words, as I said above, your credit report contains everything about any bank account, credit card, or loan that you’ve ever had.  Additionally, your credit report will detail how well you took care of your accounts.  That is, did you overdraw your bank account regularly, if you paid your credit card or loan late, and how often.

But, if you were a victim of identity theft, like me, it’s also going to tell you if there have been credit cards or car loans taken out in your name.  Or, even simpler things like a credit card you closed that is still showing as active on your credit report.  Reading your credit reports routinely throughout the year and monitoring what’s on your credit report is like going to the doctor for a checkup.  You keep an eye on what’s going on so that little things don’t become big things. 

  

What is Included in a Credit Report?

Your credit report is created and maintained by companies called credit reporting bureaus.  There are three credit reporting bureaus, also called credit agencies: Experian, TranUnion, and Equifax.  Each one of these credit reporting agencies includes the following information on your credit report:

  • Personal identifying information such as:
    • Your current name, as well as any other names you have ever gone by, including nicknames and middle names
    • Every address you’ve ever lived at
    • Birthdate
    • Your social security number
    • Phone numbers
  • Credit Accounts
    • Current and historical accounts
      • Mortgage Accounts
        • Name of lender
        • Current balance
        • Dates opened and closed
        • Payment history, with past due payments highlighted
      • Credit Card Accounts (also called revolving accounts)
        • Name of the credit card company
        • Current balance
        • Credit limit
        • Dates the card was opened and closed
        • Payment history, with past due payments highlighted
      • Installment loans (car loans, furniture loans)
        • Name of lender
        • Current balance
        • Dates opened and closed
        • Payment history, with past due payments highlighted
      • School Loans
        • Name of lender
        • Current balance
        • Dates opened and closed
        • Payment history, with past due payments highlighted
  • Collections Efforts
    • Name of the original creditor
    • Current Collection Agency/firm
    • Original collection amount
  • Public Records
    • Bankruptcies
    • Liens
    • Foreclosures

 

In other words, your credit report contains your entire financial life and can start as early as your very first bank account or the car loan you got in college, all the way through the mortgage refinance you did last year. 

Typically, items stay on your credit report for seven to ten years, depending on what it is.  For example, accounts that went to collections can stay on your report for as long as seven years and bankruptcies for as long as ten years.  Which means that not managing your money and your payments well can cause you problems for a very long time.

Each credit reporting bureau tracks items differently, which is just another reason to look at your report regularly.

 

How to Read Your Credit Report

Once you’ve accessed your credit report, you’re going to want to spend some time reading through all of it and verifying the following:

  • Your name, social security number, and other personally identifiable information is correct
  • All of the cards listed are yours
  • All of the cards listed as active are yours
  • That the outstanding balances on your cards are correct.  (Note, any transactions within the last 30 days may not have been updated yet)
  • Mortgage amounts and balances are correct
  • Mortgages that have been refinanced have been closed
  • Car loan balances are correct and/or closed if they have been paid off
  • School loan balances are correct and/or closed if they have been paid off
  • Personal loan balances are correct and/or closed if they have been paid off
  • Verify that any noted late payments were actually late

If any item on your credit report is incorrect, contact the credit bureau, as well as the bank or other financial institution which has the wrong information.

 

Interest Rates on Credit Cards and Mortgages

Your payment history and current total debt outstanding may also be taken into account when financial institutions decide what interest rate they will charge you for the money they loan you.  

For example, the total credit card debt you have outstanding can affect the interest rate banks will charge you.  If you have a lot of cards with high balances, your interest rate on those cards will most likely be high (above 12%).  That’s because the credit card agencies are evaluating the risk that you might not pay the balance on the cards back, or that you might default on the cards completely.  

Risk is associated with interest rates.  The higher risk you become for the bank, the higher the interest rate they are going to charge you.  


In fact, if you have a lot of cards and you start running the balances up on those cards the credit card company has the right to raise the interest rate on your cards.  Even if you’ve never missed a payment!

 

Late Payments on Credit Reports

Additionally, your credit report not only lists out, in detail, every bank account or loan you’ve ever had, your credit report also lists out, in detail, every month you paid your bills on time and every month you did not pay your bills on time.  

If you’ve ever made a payment more than thirty days late, that information is listed on your credit report.  Banks and other financial institutions use that information to evaluate your loan packet and decide if they will, or won’t, loan you money.  

Too many missed payments, especially if those payments have been missed recently and the bank may turn down your loan.  Or, they may write the loan, but charge you a substantially higher interest rate making the loan much costlier than it might have been.

 

What If Information on My Credit Report is Wrong?

If any of the information on your credit report is wrong contact the creditor, biller, or vendor and tell them exactly what is incorrect.  Follow up with them and keep checking your credit report until the errors are corrected.  Never assume that it’s done until it’s gone!

 

What’s the Best Site to Get a Free Credit Report?

The best site to get a free credit report is annualcreditreport.com.  This is the only site that is truly free by federal law and therefore WILL NOT send you a bunch of spam! 

Please, DO NOT use freecreditreport.com.  This is not actually a “free” site as they will bombard you with credit card offer spam. 

 

How Often Should You Look at Your Credit Report? 

In my opinion, you should get your credit report from each agency once per year.  

You are allowed to request one credit report from each of the three credit agencies, Experian, TransUnion and Equifax, once every twelve months. 

My best tip for getting your credit reports is to pull one from each credit reporting agency at different times throughout the year.  In other words, don’t request all three at the same time.  In general, they all should all contain the same information.  

So, pull each one at a different time throughout the year so that if someone does open a credit card in your name or a payment shows up as late when it shouldn’t have been, you’ll see those items in a timely manner and you can address them.

 

My System for Keeping an Eye on My Credit Report

Like you, I have a busy life, and pulling my credit report is not something I simply remember to do.  I need a system to remember to pull my credit report from each of the three credit reporting bureaus once per year, or once every twelve months.  

In my life, if it’s not on my calendar, it’s probably not going to happen.  So, I have devised a SUPER SIMPLE way to always remember to look at my credit reports every year.

What I do is pull my credit report from Experian on or around New Year’s Eve,  TransUnion on my birthday and Equifax on or around the Fourth of July.  

Why?  

Number one, because these are dates that are easily remembered and that I can put in my calendar.  Like I said, If it’s not on my calendar, it just doesn’t happen!  

Number two, by requesting my credit reports at different times during the year, I’ll be able to track what has shown up, what has dropped off, and any errors or irregularities.  If there’s anything wrong, I’ll catch it in a timely manner and I can take the necessary steps to fix it.

 

To recap my SUPER SIMPLE system for keeping an eye on my credit reports each year:

  • Experian - on or around New Year’s Eve
  • TransUnion - on your birthday
  • Equifax - on or around the Fourth of July

 

Remember, go to annualcreditreport.com for a truly FREE report!

 

Conclusion

Understanding what your credit report is, what’s on it, and how to read it are fundamental personal finance skills that are super easy to learn.  Checking your credit report at each of the three credit reporting agencies each year is not only your first defense against identity theft, it’s also the first start in building a personal finance “system” that works for you and protects your life and your money. 



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