Your credit report is the story of your credit experiences. It can impact everything from loan qualifications and interest rates to employment opportunities to your mobile phone bill. That’s why it’s important to understand what’s in your credit report, review it regularly and address any errors you find.
What is a credit report?
A credit report contains information about your credit obligations and repayment history. It includes details such as:1
- Your current and previous loans or other types of debt, including credit limits and balances
- Your payment history, including how much and how often you pay, as well as missed or late payments
- Bankruptcies and liens
- Your personal information, including current and former name(s), address(es) and employer(s); your birth date and part or all of your Social Security number
- Businesses that have recently requested your credit report
Why is a credit report important?
Many companies review your credit report when deciding whether to do business with you and when determining the interest rate or other terms they’ll offer you.2 This includes lenders, insurance companies, mobile phone providers and utility companies, landlords and even some employers.
The data in your credit report is also used to calculate your credit score, which lenders use to predict how likely you are to pay back money you borrow. The best-known credit score is the FICO Score®, which is used by 90% of lenders.3 The five factors below are weighted when determining your FICO Score:4
- 35% Payment history (do you pay on time)
- 30% Credit utilization (how much of your total available credit are you using)
- 15% Length of credit history (typically, the longer you’ve held credit accounts, the better; includes the average age of your credit accounts)
- 10% New credit (in general, opening several new accounts in a short time is considered risky behavior)
- 10% Credit mix (such as credit cards, installment loans, mortgage loans)
How do you review your credit report?
Given the importance of the information in your credit report, it’s vital to review your credit report to make sure the data is accurate. This can also help you spot signs of potential identity theft or fraud, such as finding credit accounts you never opened.
There are three primary agencies that compile credit reports — Experian, TransUnion and Equifax. Not all businesses report to all three agencies, so you should review reports from each one, as they may contain different information. You can request a free credit report through AnnualCreditReport.com.
Some errors to look for include incorrect personal information, accounts you’ve closed that show as open, duplicate accounts, and incorrect balances, credit limits or payment details.5
If you find an error, contact the relevant reporting agency and the company that provided the information (such as a lender or credit card issuer). You can find more details about how to dispute information from the Consumer Financial Protection Bureau.
We’re Here to Help
Keeping your credit report current and correct is critical to your financial wellbeing. It’s important if you’re purchasing a new home and need a mortgage, or if you want to refinance at the best rate and terms. And if you’re ever refused for a refinance or a second mortgage due to poor credit, you should know waiting three to six months may be enough time to improve your credit and have your application reconsidered.
You can talk to our lending experts if you have questions about qualifying for the mortgage loan or the mortgage lending process. Visit us online or call 1-844-518-2360.
1 “All About Credit Reports: What is a credit report,” AnnualCreditReport.com, https://www.annualcreditreport.com/whatIsCreditReport.action, accessed May 4, 2023
2 “Credit Reports and Credit Scores,” Board of Governors of the Federal Reserve System, https://www.federalreserve.gov/creditreports/pdf/credit_reports_scores_2.pdf, accessed May 4, 2023
3 “What is a credit score?” myFICO, https://www.myfico.com/credit-education/credit-scores, accessed May 4, 2023
4 “What’s in my FICO® Scores?” myFICO, https://www.myfico.com/credit-education/whats-in-your-credit-score, accessed May 4, 2023
5 “What are common credit report errors that I should look for on my credit report?” Consumer Financial Protection Bureau, last reviewed Sept. 1, 2020, https://www.consumerfinance.gov/ask-cfpb/what-are-common-credit-report-errors-that-i-should-look-for-on-my-credit-report-en-313/, accessed May 4, 2023