What is a Credit Report?
Let’s face it. Finances can be confusing, and most people aren’t meticulously scanning their credit reports every day making sure there are no errors or indications of fraud. But we’ll demystify what these documents are so that you can better prevent identity theft and credit fraud.
Let’s start with the basics. A credit report is a document that contains information about your credit activity and current financial situation, including payment histories and the status of your credit accounts. For the most part, these reports are provided by three bureaus — Experian, TransUnion, and Equifax.
Lenders and creditors use your credit report to determine all sorts of things, like gauge if you’ll continue to meet the terms of an existing account or to offer you insurance, rent you a home, or issue you an auto loan. Your credit report can also be used by potential employers to make decisions on whether or not to hire you.
Did You Know? It pays to review your credit report. According to the Federal Trade Commission, one in five reports contain errors.
So yes — they’re important. You want to make sure that all of the information on your report is accurate and up to date. If it’s not, there might have been a mistake made somewhere along the line, or worse — you might be the victim of identity theft.
When you request your report, it might seem a little complicated at first. That’s okay though, once you know what you’re looking at, things become a little less daunting. Credit reports are divided into four sections, so let’s break those down.
What to Look for in Your Credit Report
The first section of your credit report is your personal information. This will include your name, any nicknames you go by, your current and former addresses, and sometimes it’ll include your marital status or employment information. Easy enough.
The next section, your credit information — or as they're sometimes called, tradelines — will make up the bulk of the report. This is the information that tells lenders and creditors your history of handling credit accounts. This’ll include a list of your current creditors along with balance information for those accounts as well as payment patterns for the last 24 for 36 months. If you have a late payment or something that has gone to collections, it’ll be indicated in this section.
Next, you’ll find the public records section. This is where anything related to your creditworthiness that shows in your public records will appear. This might include liens, bankruptcies, repossessions, court-ordered child support, or other judgments. Pay close attention to this section. If something doesn’t look right, you’ll want to get it resolved right away.
FYI: Bankruptcy will stay with you for several years, negatively impacting your credit. But bankruptcy is not the end of the world.
Finally, you’ll find your inquiries section. This is a list of anyone who has accessed your credit report. Just so you know, these inquiries can either be hard or soft. A hard inquiry is one that is initiated by you, such as applying for an auto loan. A soft inquiry happens when your report is checked for a reason unrelated to credit applications such as offering you pre-approval for a new credit card.
Most of the time hard inquiries will negatively impact your credit slightly, so you want to avoid accessing your report in this way too often. Be sure to pay attention here. If there are hard inquiries you don’t recognize, it’s a very good indicator that you’re the victim of identity theft.
So if you were wondering what a credit report is, there’s your answer! Although it might be a little intimidating the first time you go through your reports, there’s nothing convoluted here. Just keep an eye on things to make sure there’s no suspicious activity, and you’ll be all set.
How To Dispute Something on Your Credit Report?
So if you’re being vigilant, you’re checking your credit reports from all three bureaus at least once a year. This will ensure there are no mistakes or fraudulent items negatively impacting your scores.
But what do you do if you find something you don’t recognize? What if there’s something suspicious? Do you have any recourse to dispute your credit report? These are all great questions.
Luckily the three major credit bureaus — Equifax, Experian, and TransUnion — have mechanisms in place to resolve disputes. It’s free to dispute an item on your credit report, and both the credit reporting bureau and the information provider (the company or organization that’s giving financial information to the bureau) are legally obligated to respond to your dispute in a timely manner.
Did You Know? If negative information on your credit report is accurate, it could be there for a while. Most negative information will stick around for up to 7 years, and bankruptcy will appear on your credit report for up to 10 years.
While every situation is unique, generally speaking, disputing an item on your credit report is a two-step process: contacting the bureau, and contacting the information provider.
You’ll have to contact the credit bureau in writing with the information you think is inaccurate. The federal trade commission has a sample dispute letter you can use, or you can use the credit reporting bureaus’ online portals:
You’ll need to include copies of any documents that support your case, and clearly indicate which items in the report you’re disputing, and request that the item or items are corrected or removed entirely.
Then it’s up to the bureau to investigate the item in question by reaching out to the information provider for their side of the story. This process usually takes about 30 days, and the bureau will provide you with any relevant information they uncover.
Once the investigation is complete, you’ll receive the results in writing and a new copy of your credit report if it’s changed as a result of the bureau’s inquiry. The bureau can also send updated reports to anyone who requested your file in the past six months, and up to two years if the request was related to your employment.
Did You Know? About 1 in 5 credit reports contain errors, according to the Federal Trade Commission. Thankfully, the best identity theft plans offer credit report monitoring and credit score checks so you can stay on top of your creditworthiness.
While all this is going on, you’ll also need to inform the information provider in writing that you’re disputing a piece of information. You can use the FTC’s sample dispute letter if you’d like. Similar to dealing with the credit bureau, you’ll need to include copies of the documents that support your position. They’ll get in contact with the bureau and everyone will be on the same page.
If you suspect you’re the victim of fraud, there will be other considerations — you might need to contact the federal trade commission or the authorities — but more on that later.
How To Get a Free Credit Report?
Your credit report is a document containing various data sets that lenders look at to determine your creditworthiness. It absolutely pays to check this report at least once a year to make sure there aren’t any errors and nothing looks out of place. How do you get your hands on your free credit report, though? We’ll tell you below.
FYI: Errors on your credit report can drive up your interest rates or you could be denied a loan because of them.
You’re entitled to a free credit report from each of the three major credit bureaus — Experian, TransUnion, and Equifax — every year. You can request your report directly from each agency, or, like the FTC recommends, you can visit annualcreditreport.com to request copies.
Remember, you’ll need your name, address, social security number, and address to request a report.
Keep in mind that reports can be a little confusing if you’ve never seen one before. So now that you know how to get it, here’s what you can expect to find in your credit report.
Lot’s and lots of information, for starters. The first section includes your personally identifying information, so just make sure that’s all accurate and up to date. Then you’ll move on to the credit account information section. This is where lenders can see your accounts, mortgages, student loan debt or vehicle loans. You’ll also see when those accounts were open, your balances, and your payment history.
Did You Know? Fraud has been on the rise during the COVID-19 pandemic. That’s why Experian, TransUnion, and Equifax are offering free weekly reports. We can’t say for certain how long this will last.
Next, you’ll move on to inquiry information. There are two types of inquiries: soft and hard, and both will show up here. Make sure these inquiries make sense — you’ll see one when you bought your car, for example. If there are inquiries you don’t recognize, it could be an indication someone has or was trying to steal your identity.
Finally, you'll find information on delinquent accounts that have been turned over to collections agencies and bankruptcies. Here’s where you really want to be careful. If anything looks out of place in this section, you’ll want to act quickly to resolve it.
So that’s that! That’s how you get a free credit report. Like we said above, it’s your right to be provided with a free report from each bureau annually. Make sure you take advantage of that right to ensure your credit is healthy, your finances are in order, and most importantly, your identity is secure.
How to Freeze Your Credit
So, you want to know how to freeze your credit? First, let’s discuss why you’d ever need to consider a credit freeze in the first place.
In order to establish a new line of credit or take out a loan, a lender does a “hard inquiry” into your credit file. This helps them determine your creditworthiness — or how likely you are to pay back debt — and will inform their decisions whether or not to issue the loan or line of credit and what your interest rate will be.
Did You Know? Hard Inquiries typically lower your credit score by a few points, but that ding will drop off after two years. It’s not a huge deal if you’re applying for a mortgage or taking out an auto loan, but you might want to think twice about applying for a fist full of credit cards all at once.
Now let’s say someone has stolen enough of your personally identifying information to pose as you and applies for a credit card in your name. The credit card company hard-pulls your report, everything looks good, so they issue the fraudster a credit card. They go on a spending spree, never pay the bill, and when it gets sent to collections, the debt collectors start coming after you.
Nightmare, right? Luckily there are a few ways to prevent this from happening, namely credit freezes and credit locks.
Generally speaking, credit freezes and credit locks accomplish the same thing. They prevent creditors and lending agencies from accessing your credit files, and, by extension, prevent unauthorized parties from taking out loans or establishing lines of credit in your name.
Federal law gives you the right to activate and remove credit freezes from each bureau for free. You’ll have to contact each credit bureau individually — Experian, TransUnion, and Equifax — to request them to freeze your credit file. In most cases, this can be done electronically.
Each credit bureau is required to place the freeze within 24 hours of your request, and they’ll provide you with a PIN you’ll need to unfreeze your file. The freeze must be lifted within one hour of request with the provided PIN. Just FYI, though, if you lose the number you can be issued another, but it will take much longer to unfreeze your file.
Locks differ from freezes, but only slightly. They accomplish the same thing, but locks are set and lifted in real-time. Locks are usually set up through third-party vendors like identity theft prevention products or through a secure website or app provided by the credit monitoring bureau. To set up a lock through the credit monitoring bureaus, you’re going to need proof of identification that can be submitted electronically or via hard copies.
How To Check Your Credit Score
Before we dig into how to check your credit score, here’s a basic rundown of what your credit score is and why it’s so important…
Your credit score is a three-digit numerical expression of your creditworthiness based on analysis of data contained within your credit files. This includes your credit history, your payment history, and the amount of debt you carry. Simply put, it’s a number lenders look at to determine how likely you are to pay back your debt.
Higher credit scores indicate to lenders that you’ve demonstrated responsible financial behavior in the past and lead to more favorable outcomes when you’re trying to secure a loan or establish a new line of credit. This usually means lower interest rates, higher credit limits, and lower payments.
That said, everyone’s financial situation is unique, and different lenders may have different criteria when it comes to granting credit beyond your score alone. Generally speaking, credit scores are broken down into categories ranging from “Poor” to “Excellent.”
Credit Score Breakdown
- 300-579: Poor
- 580-669: Fair
- 670-739: Good
- 740-799: Very good
- 800-850: Excellent
Three main credit bureaus provide these scores — Equifax, TransUnion, and Experian. These are the main data collection agencies in the U.S., and they use different methods and data points to determine your creditworthiness in a variety of situations and circumstances.
The most popular model is the FICO score — which can be “industry-specific” or “general-purpose.” There are other scoring models such as VantageScore, but most of the time, when you’re talking about your credit score, you’re referring to the general-purpose FICO score from one of the major credit bureaus.
Did You Know? It’s perfectly normal for your scores to fluctuate slightly between the three bureaus. While they all use similar data sets, they sometimes weigh specific indicators differently.
So… how do you check your credit score? Great question!
First, you should know that everyone is entitled to a free credit report from each of the three bureaus once every 12 months. This will give you access to all of the data points used to calculate your score but usually won’t include the score itself. To find that out, you have a few options.
First, check with your credit card company, financial institution, or loan organization. Oftentimes these entities will provide scores to their customers. It might already be on your statement, or you might be able to access it online by logging into your account.
Or, you can contact the three credit bureaus directly. You’ll have to create accounts, and keep in mind there will be a small fee associated.
You can also check your scores using any one of the many online services available. Some of these are free, some of them are not. Some of them give you all three scores, some only one. Some will give you access to other credit functions, some will be more bare-bones. To cut the wheat from the chaff, it helps to figure out what your needs are before registering with any of these third parties.
Finally, the best option (in our opinion) is to sign up for an identity theft protection service. We highly recommend you go this route. Reputable services like IdentityForce, NortonLifeLock, or Identity Guard will give you real-time access to your credit scores and will alert you if there are significant changes.
FYI: Want to find coverage that includes restoration if you happen to fall victim to fraud? If so, read our guide to the best identity theft protection with restoration. You’ll find that these plans all come with up to $1 million in identity theft insurance, dedicated restoration resources, and other benefits should you be targeted by fraudsters.
Not only does your credit score play an important role in determining some of your biggest financial decisions, it can also be an excellent bellwether of identity theft. If there are unexpected drops in your score, it’s a good indication that someone is using your identity to make purchases, secure new lines of credit, or take out loans in your name without your consent. If this goes unchecked, the damage can be insurmountable. So it’s absolutely critical that you keep an eye on your credit scores.
Features of Identity Theft Protection Plans with Credit Monitoring
The following are the most common features of identity theft protection services that include credit protection:
