What Are Credit Reports and When Might You Need Yours?

Many of us won’t even become aware of credit reports until we apply for our first car loan, credit card or mortgage. To some, it can be a shock that there’s a record of our credit history for lenders to see and that our financial behavior is tracked in some detail. Others will spot the opportunity to accumulate as much proof as possible of responsible budgeting and borrowing. Here’s what’s in your credit report and why it’s always worth monitoring yours. 

When Do You Need a Credit Report?

Your friends and family might happily vouch for you as a stand-up character, but lenders have no way of knowing if you represent a moderate or significant risk as a borrower — not without a credit report, that is. Only about a third of Americans check their score each year — usually when applying for a loan, credit card or mortgage — so ongoing credit monitoring is a good financial habit to develop. That’s because lenders are not the only ones with an interest in your financial information. There were almost five million reports of identity theft received by the Federal Trade Commission in 2020. Checking your credit report regularly will reveal that your personal details have been compromised before more damage can occur. 

What Is (and Isn’t) on a Credit Report?

Surprisingly, you couldn’t even see your credit report until the introduction of the general-purpose FICO score in 1989. Prior to that, credit scoring was an activity between lenders and reporting bureaus, with the borrower kept out of the loop. Since 2003, consumers have had the right to receive a free credit report once a year, but that should be your minimum to stay on top of your score. 

Your Credit Report Reveals the Following   

• Standard personal information (i.e., name, social security number, current and past addresses and employers). 
• Up to 10 years of current and historical credit account information, including the balance and credit limit for each card or loan. 
• Payment history. This is one of the decisive factors in achieving your best score.  
• Public records, including any bankruptcies, liens or foreclosures. 
• Previous inquiries on your credit report from lenders. 

Your credit report does not share certain personal information, such as your marital status or ethnicity, and neither does it reveal your income. 

How You Can Check Yours

You could wait until your next loan application to check your score, at which point your lender will pull your credit report from one or more of the big three reporting bureaus. We wouldn’t advise that, however. Your credit score is one of your most important personal financial metrics, and if there’s an error on one of your reports or a significant difference between your credit scores, you could fall short of what you need to secure your dream car or house. Instead, take a proactive approach and use credit monitoring to build your score. 

With SmartCredit, you not only see your 3B credit report from the major credit bureaus, but you can also contact creditors directly with Action buttons to fix errors and resolve any issues. It puts you in control of your credit report and sets you up for developing healthy financial habits that will help you achieve your best possible score. 

References:

Marketplace – A Brief History of the Credit Score
CNBC – What Is a Credit Report and What Does It Include?
CNBC – 3-Bureau Credit Monitoring: What Is It, Why Is It Important?