What's a Credit Report???
Updated: Jan 27, 2021
You just ordered your free annual credit report online via https://www.annualcreditreport.com. Now what??? Federal law requires each of the three (3) credit reporting companies (Equifax, Experian and TransUnion) to provide consumers with a free credit report every twelve (12) months. All you have to do is ask for it. However, Federal law does not require the credit bureaus to provide your credit scores in your free credit report.
Now that you have it, what does it all mean? A credit report is a record of a borrower’s responsible repayment of debts or credit history, from a number of sources, including banks, credit card companies, collection agencies and governments.
A credit scoreis developed by taking information from credit reports and analyzing that data to forecast how someone is likely to behave in the future.
Factors like how much debt consumers carry and whether they have paid their bills on time in the past are good indicators of how likely they are to handle more debt in the future.
Let’s take a look at this credit report.
Credit reports contain four (4) sections.
This section contains your personal information such as your name and social security number.
Section 2 details information on lines of credit, known as trade lines. Trade lines are recorded activity for any type of credit extended to a borrower and reported to a credit reporting agency. There are four types of trade lines; installment accounts (car loans, fixed-payment loan), mortgage account, revolving account (credit cards) and open accounts,
Section 3 are public records, such as bankruptcies, judgements and tax liens. Bankruptcy is a process where consumers who can’t repay their debt that is initiated by court order to seek relief. Judgements are orders issued by the court as a result of a lawsuit. Only civil judgments get reported to the credit bureaus and can remain on your credit report for seven (7) years. Tax liensare liens imposed by law due to delinquent payment of taxes.
Section 4 contain inquiries. Inquiries are requests made by entities, where consumers have applied credit. Six (6) or more inquiries in a short period of time are considered too many and is a good indicator of an individual who makes hasty decisions.
Now that you have the basics. Review your credit report for inaccuracies and illegal activities. If discovered, report it to the three credit bureaus and monitor for update. If your credit score isn’t where you want it to me, take the appropriate steps to improve it, while practicing sound financial behaviors. Please review my blog on “Tips for raising your credit score,” to get you started.