As consumers, most of us need credit to make important purchases in our daily lives. When people apply for a mortgage, car loan, student loan, or even apply for credit cards, we need sufficient credit. In order to have good credit, consumers need a history of making on time payments on their credit card and other loans. Also of importance is keeping our credit history clean. That’s why getting your free credit report annually is so vital. The annual credit report by the three credit bureaus provides a list of credit activities a person has participated in from different creditors and public records. It is necessary to check all three reports because there are differences in the ways each report your history. The three credit bureaus that include Experian, Equifax, and Transunion, collect credit information and prepare the credit reports online. Consumers need to make sure that there are no mistakes and discrepancies that can sometimes occur due to identity theft and just plain credit errors.
What is a Credit Report?
A credit report is a document that contains detailed information about a person’s past credit activities. The three credit bureaus collect credit data from financial organizations that a person has used in the past. This can include different types of loans and revolving credit such as credit cards, the amounts owed on them, and timelines of payments. With your permission, this information becomes available to lenders and other financial companies when a consumer applies for more credit in the form of loans and credit cards. Lenders will evaluate a person’s credit worthiness on the basis of their credit report. Whether or not a person is deemed eligible for a loan is often determined on the strength of the credit report, income, and credit score. The credit report also affects the interest rates a person gets on a loan. If someone’s credit history reflects negative trends regarding repayments, he will normally have to pay higher interest rates on a loan than someone whose credit history is positive and healthy throughout. Under The Fair and Accurate Credit Transactions Act of 2003, all the consumers are entitled to receive a free yearly credit report from all the three credit bureaus in the United State once every 12 months.
What Information Does a Credit Report Contain?
Some items that are listed on credit reports include monetary judgments, tax liens and bankruptcy records. This information is obtained from public court records. The credit report will also include information on a person’s currently opened and past credit lines. The dates the accounts were opened, the credit limit, payment history and payment pattern. The lenders and financial institutions that you have done business with provide this information to the consumer reporting agencies. Importantly, the credit report also mentions the names of the parties who have obtained copies of your credit reports from the credit agency. Equifax, for example, includes both names and addresses of such parties. The report will also mention a person’s name, phone number, address, Social Security number, information on previous and current employers, and his date of birth. The name of one’s spouse may appear on the credit report of a reporting agency, but this information is not disclosed on the version of the person’s credit report that others obtain from the credit bureau. Experian also includes rental payment history in the credit report prepared by them. This information is collected from property management companies.
What is a Credit Score?
The all important credit score is a number that consumers received based on different scoring credit factors. People should comprehend that their credit report is just a list of credit transactions that have occurred in the past that includes applying, using, and repaying credit. A great credit score allows borrowers to obtain cheaper financing to meet your financial goals and similarly a bad credit score can make life difficult by limiting your financing options available and also the amount. Your credit score is one of the biggest factors in determining whether or not you get approved for credit cards as well as obtaining a home loan or auto loan for example. Even some employers require a review of a job candidate’s credit score. This is especially true for those handling money since a bad credit score can reflect poorly on candidates and make them appear to have money problems. Everyone should proactively manage their credit score by paying all their bills in a timely manner and avoiding using more credit than they can repay. If your credit score is bad, it is important to review your credit report and improve trouble areas and fix any errors.
Difference between Credit Score and Credit Report
Credit score is, however, not synonymous with credit report. Credit report mentions a complete credit history of a person. A credit report includes the different credit accounts that have been opened and closed along with the balance that still needs to be repaid, and history of payment. Consumers can also use this report to review credit inquiries, any credit lines that have been opened. A credit score on the other hand is a number that is calculated based on different credit parameters. Credit scores range from 450 to 850. For those that score 700 and better, financing will be obtained with a lower interest rate than those who score lower. If someone wants to know his credit score, he will have to pay a fee to a credit reporting agency to obtain information on his current credit score. The agencies will provide the details on how to evaluate a credit score and how a person can improve his credit score.
Why Get Your Free Credit Report?
Your free credit report has a lot of important credit information. One of the reasons to obtain your credit report is to review it for any mistakes or weaknesses before applying for a loan or credit card. Loans can be for anything including your home, car, boat, or motorcycle. Common reporting errors do happen time to time from simple human errors. Besides the possibility of errors, there is also the threat of identity theft. When that happens, there may be unauthorized attempts to obtain and use credit in your name without your knowledge. That is why reviewing your free yearly credit report is so vital to maintaining a good credit history and score.
How to Get Free Credit Report
Every consumer can obtain a free credit report once every twelve months from all three credit reporting agencies. In order to obtain a free copy of your credit report, you can visit AnnualCreditReport.com or request a copy of the report by calling 1-877-322-8228. Consumers with hearing disabilities can call 711 to access the TTY service and can refer the operator to 1-800-821-7232. There is also the option to obtain a copy of your credit report by mail. A credit report reflects a person’s financial history. It is vital to obtain your annual free credit report from the different credit bureaus so that you are aware of your credit activities and how that affects your financial goals.