Understanding Your Credit Report and Credit Score

The three major credit reporting agencies (CRAs) — Equifax, Experian, and TransUnion — collect information about you and your financial history and summarizes it in your credit report. Your credit report includes the following data: 

• Personal information
  Your name (and any names you’ve used in the past), Social Security number, current and past addresses, and employment information.
• Credit history
  Status of credit lines and loans in your name, including banks, credit card issuers, retailers, Internet and cell phone service providers, and other lenders.
• Inquiries
  Records of everyone who’s accessed your report in the last two years, including lenders you’ve applied to for loans and those who have requested your file to offer you preapproved credit.
• Information in the public record
  Any tax liens, bankruptcies, and monetary judgments against you, while most of the negative information on your credit report is dropped after seven years, a bankruptcy may stay on your credit report for ten years.

Anyone with a legitimate business need can request a copy of your report, including lenders, landlords, current and potential employers, and government and licensing agencies. Because your credit report is used in so many different ways, you’ll want to make sure it’s an accurate reflection of your financial history. We recommend that you check your reports for accuracy at least once a year. You should also request copies a few months before you make a major purchase, such as a new house, car or apply for a job.

What’s the credit score?
The credit bureaus also assign you a credit score based on your credit report — a number from 300 to 850 that reflects its assessment of the risk you pose to potential lenders. Many lenders prefer credit scores to credit reports since they boil a lot of complex information down to a single number. Credit scores can also speed the application process for a loan, since lenders can make credit decisions based on them almost instantly.

Every lender sets its own threshold for an acceptable score — there is no single cut-off for receiving credit — and determines the interest rate you qualify for. In general, the best — or lowest — interest rates go to people with the highest scores. The top 20% of credit reports receive scores over 780, while the lowest 20% receive scores under 620. Although you can obtain free annual copies of your credit report, you’ll have to pay a modest fee to obtain your score.