If you've had a credit card or a loan at any point in the last seven years, you probably have a credit report.
Credit reports are important financial documents that have information in them about how you've managed your debt, including whether or not you've made your monthly payments on time.
Knowing how to pull and read your reports is a key financial skill, since it can help you improve your credit scores and catch signs of identity theft. Yet, in my work as an NFCC-certified credit counselor and financial educator, I've found that people are confused by the information in their credit reports. So here are some tips for tackling these important documents and understanding what's inside.
A credit report is a document that details your history with debt over the last seven to 10 years. This includes your credit cards and loans, and any bills that turned into collection debt if you fell behind on the payments. Credit reports help lenders, landlords, insurers, and others assess your creditworthiness, or how likely you are to repay borrowed money and generally meet financial obligations.
How does information get into your credit reports? Banks, credit card companies, and lenders report your payment behavior regularly. to the three national credit bureaus (Experian, Equifax, and TransUnion) each month. However, some creditors don't report information to all three bureaus, so it's normal to find differences between your reports.
View a sample credit report from Experian>>
Credit reports have detailed information about your debt accounts and how you've managed them. Here's what you'll find inside, and how to make sense of it all.
Any identifying information you've included in a past credit application can show up in your credit reports. This information is meant to help verify your identity when someone wants to pull your reports. Here's what's included:
Your credit reports contain extensive details about your credit cards and loan accounts, including the dates each one was opened, how much you owe, and whether or not the accounts are closed.
You'll typically see these accounts split into one of two categories
-
Satisfactory accounts: These are accounts where you've made all of your payments as agreed. Satisfactory accounts stay on your credit reports for 10 years after they're closed.
-
Adverse accounts: This category sounds a little misleading, since it can include accounts that are in good standing. If you've missed just one payment on the account, even if you're current on your payment now, the account will stay in this category for seven years from the date of the missed payment.
To help ensure you understand everything in your reports, here are a few common account terms in credit reports that might not be familiar:
-
Primary holder: You're the main account user, and you're legally responsible for repaying the debt.
-
Authorized user: You have access to the account but are not legally liable for the debt.
-
Secured: The debt is backed by collateral (such as your home or car).
-
Unsecured: The debt is not backed by collateral.
-
Revolving: Available credit on the account can increase or decrease as you charge transactions and subsequently pay down the balance (credit cards and other lines of credit).
-
Installment: The balance on the account is paid off in monthly payments.
-
Current: You're up-to-date on your payments.
For each debt account, you'll see a calendar that has information about your past monthly payments.
In my experience, this is usually the hardest part of the credit report to read, particularly if you've never seen a credit report before. But it's actually pretty easy to understand with a little information.
For each month on the calendar, there will be a note that represents the status of your account. Here's a breakdown of the notes you might see:
-
Green box or “OK”: You made your payment as agreed.
-
Numbers: Numbers, such as 30 or 60, represent how many days late you were/are on the payment. On some reports, the numbers appear in yellow or red circles.
-
Blank: The creditor did not report your account information that month. This does not reflect negatively on you.
-
Other: Any other note usually means the account was closed due to severely overdue payments. For example, “C/O” means it was charged off, and “COL” means it went to collections.
Some credit reports have keys that are helpful, since they explain the meaning of each note that appears on that report.
This section is where bankruptcies are recorded. (In the past, certain other public records such as civil judgments and tax liens were also included, but these no longer appear on credit reports.)
If you've filed Chapter 7 bankruptcy, it will appear here for 10 years after you file. Chapter 13 bankruptcy stays on your reports for seven years after the date you file.
If you have an unpaid debt or an overdue bill, and the account gets sent to collections, it could show up in the collections section of your credit reports or the “Adverse accounts” section.
The collections section will have important information for anyone who wants to settle their debt, and for people who want to verify that a debt collector is telling them the truth about their debt. This includes:
-
Contact information for the collection agency
-
Name of the original creditor
-
Original amount owed
-
Current balance
-
Date the account is scheduled to be removed from your reports
Inquiries refer to instances where a person or company pulls your credit reports. There are two types of credit inquiries you may see on your reports, and each one impacts your credit scores differently:
-
Regular or “hard” inquiries: Your credit was pulled in order to determine if you qualify for new credit. Hard inquiries typically have a minimal impact on your credit. However, many hard inquiries within a short period of time can have a larger negative effect on your credit (with the exception of rate shopping), though the effects lessen with time and generally fall off your reports within two years.
-
Account review or “soft” inquiries: Your credit was pulled for informational purposes. For example, you pulled your own credit reports. These inquiries do not impact your credit scores.
At the end of your credit reports, you'll see a long list of information about your rights as a consumer.
If you find an error in your credit report, this section provides instructions on how to file a dispute, which is the process for getting incorrect information updated or removed from your reports.
In my experience reviewing thousands of credit reports with consumers, I've found that most people find their reports confusing and even overwhelming at first. Here are a few more tips to make the experience manageable.
Most credit reports are just a few pages long, but for people who took out federal student loans several years back, for example, their reports can be dozens of pages long due to the detailed payment calendars.
If this is you, try not to panic when you see your reports. As long as the information is correct, the length of your credit reports is nothing to worry about!
Regardless of the length of your credit reports, the most important thing to remember is that credit reports should only reflect the facts. If you slow down and read each item one by one, you'll start to realize that you're already aware of most of the information, even if you've forgotten some of the details.
If you give your credit reports a good read and you're still a little confused (which is not terribly uncommon), you can get professional help. Set up a free call with an NFCC-certified credit counselor, and they'll help you break down the details.
A healthy credit report is like a passport to financial opportunity. If you've managed your debt responsibly, your credit reports will show that, and you're more likely to be approved for good credit cards and loans, and even for new apartments or certain jobs.
If you've missed lots of debt payments or you have multiple accounts in collections, the negative information will follow you for several years.
On top of that, your credit score calculation is based on the information in your credit reports. And if you don't have good credit scores, you'll pay higher interest rates on new credit, or you may simply be denied when you apply.
There are tons of sites online that sell credit reports, and some will even give you one of your reports for free. But the only source I recommend using is AnnualCreditReport.com. This website is a federally backed service that lets you pull your full credit reports, not just summaries, from all three credit bureaus for free. You can pull each of them once a week, although you don’t need to review them that often (once a year is fine for most people).
If you're unable to pull your reports via the website, you may be prompted to send in a request by mail. But before you do that, try calling 877-322-8228 to see if you can request the reports by phone instead.
