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You have heard over and over again that you should check your credit report regularly. You know it’s important, but what is it, and where and how does the “validation” take place?
Keep reading to find out everything you need to know right now.
What is a credit report?
A credit report is a record of your current and past credit accounts – credit cards and loans – and it includes information such as your payment history, credit limits, highest card balances, and debt-to-limit ratio. It also includes any recent loan requests, collectibles, and public records such as bankruptcies.
Where can I get a credit report?
Credit reports are produced by three major credit bureaus – Equifax, Experian and TransUnion – with information provided to them by banks, card issuers, lenders, collection agencies and other data providers.
You are legally entitled to receive one free copy of your credit report per year from each of the bureaus on AnnualCreditReport.com. And credit bureaus continue to offer one free credit report per week during the coronavirus pandemic.
What is in a credit report?
This is the kind of information you can expect to see on your credit report.
- Your name
- Your social security number
- Your current and previous addresses
- Information about your current and past loans and credit card accounts
- Collection items
- Outstanding medical debts that are over 180 days old and not covered by insurance
- Your public information such as bankruptcies (but not tax withholdings)
- List of companies that have reviewed your credit history
Why should you check your credit report often?
Your credit report forms the basis for your credit score, a numerical score that typically ranges from 300 (poor) to 850 (excellent).
Lenders rely on credit reports and scores to evaluate borrowers and decide whether to offer them credit and on what terms they will do so.
A clean credit report and a good credit score (670 or higher) can help you secure favorable interest rates on home and auto loans and qualify for the lowest interest rate credit cards with the best rewards and benefits.
Your credit report can also be used by employers and landlords to determine whether they will hire or rent you.
In addition, monitoring your credit is an important defense against fraud. If an identity thief opens a credit account using your personal information, it will appear on your credit report. The sooner you discover a fraudulent account, the sooner you can delete it and recover from any damage. If this possibility bothers you, you can also freeze your loan, which will prevent you (and anyone else) from getting a new loan until you release the block.
It’s also important to keep an eye out for any errors in credit reports – a common occurrence given the vast amount of data that is transferred between data providers and credit bureaus. Mistakes on your credit report can make you less creditworthy than you really are, especially if your file is mixed up with that of another person with bad credit.
bottom line
To keep your credit history in top shape, retrieve a free credit report from one of the three credit bureaus every four months and review it carefully to ensure all information is accurate and up to date. Also, take steps to correct any negative points that could lower your credit score.
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