Understanding Credit Reports
It's like a report card but for financial habits.
Molly Wilkinson, the executive director of the American Banker's Association's Card Policy Council said it best:
"Your credit score is akin to your cumulative GPA, while a credit report most closely resembles your grades from every report card over the past seven years."
Credit card issuers and lenders pull and review your credit report to help determine things like whether you’re a credit risk, what interest rate they’ll offer you, and the amount of your credit limit. The Fair Credit Reporting Act requires each of the three credit reporting bureaus to supply consumers with a free credit report once per year.
The Key Components
It's important to note that each credit bureau organizes its reports differently, so the reports may look different and the sections may fall in a different order. That said, credit reports are typically divided into four primary categories of information.
1. Personal Information
This section consists of identity information, which often includes your:
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full name
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social security number
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date of birth
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phone number.
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current and previous addresses
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current and previous employers
2. Credit History
This is where you'll find specific details on your credit accounts, whether those are retail credit cards, bank loans, mortgages, or bank credit cards. Generally, for each of your credit accounts they will provide:
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the account number
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the creditor's name
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the amount borrowed
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the amount owed
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the credit limit
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dates the account was opened, updated, or closed
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timeliness of payments
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late payments
Essentially, this information is meant to demonstrate how you've managed your financial obligations.
3. Public Records
This section may include bankruptcies, foreclosures, tax liens (which secure the government's interest in your property when you don't pay your tax debt), and civil judgments against you (eg. child support), all of which can hurt your credit.
4. Credit Inquiries
Inquiries are entries that appear on your credit report when your credit information is accessed by a legally authorized person or organization (including yourself).
There are two types of credit inquiries: hard inquiries and soft inquiries. Soft inquiries usually comprise account reviews and preapproved offers, which have no effect on your credit score. Hard inquiries include applications for credit or certain services and can affect your credit score, at least temporarily.
See for yourself
Below is a sample credit report by Sallie Mae Bank that helps explain the different sections. Take a second to look it over so that you're familiar with what a credit report generally looks like.
