What's in Your Credit Report?
By Kristi Vaughan
Need a car loan? Planning to apply for a mortgage? Or wondering why your homeowners insurance company considers you a risk? For these reasons and more, it can pay to know what is in your credit report.
What is a credit report?
A credit report is basically an analytical means of determining your ability to repay a loan.
There are three major credit reporting companies:
They all compile and analyze your financial information. This information includes:
- Bill paying history
- Outstanding debt
- Number and type of credit accounts
- Late payments
- Collection actions, if any
This information is fed into a statistical program and compared to others the credit reporting company has identified as fitting your profile. Because each company has their own statistical method, the results can vary somewhat.
Understanding credit
Good credit enables you to borrow money at a lower interest rate and achieve dreams such as homeownership or starting your own business. Poor credit, of course, has just the opposite effect and, once established, can take time to repair.
To help consumers understand the impact their spending and borrowing habits have on their credit rating, organizations such as Freddie Mac and the Federal Trade Commission have prepared comprehensive educational programs. The Jump$tart Coalition for Personal Financial Literacy works to educate young people on all matters financial.
Good credit vs. bad credit actions
A brief overview of some of the key actions that can make you credit worthy or credit non-worthy follows.
To build good credit:
- Live within your means
- Pay your bills on time
- Don’t sign up for every credit card you are offered
Actions that will count against you:
- Personal bankruptcy
- Carrying many credit cards and losing track of your spending
- Maxing our your credit cards
- Late payments
To safeguard your credit:
- Regularly check your credit report
- Watch for warning signs including strange data
What is not included in your credit report
Credit reporting agencies need personal information such as your name, address, Social security number and employer’s name and address. But they do not use information about gender, ethnicity, religion, political affiliation, medical history, criminal records or other information not related to credit.
Obtaining a copy
Under the federal Fair and Accurate Credit Transactions Act signed into law in December 2003, everyone is entitled to one free copy of their credit report each year.
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