How to Get and Understand Your Credit Reports & Credit Scores

If you've ever applied for a credit card, charge account, personal loan, insurance or a job, there's a credit file on you. It is called a credit report. You can think of your credit report as a "report card" on how you've handled credit in the past. It lists your credit accounts and whether you've paid those bills on time or not.

Credit reports are compiled by three major companies: Equifax, Trans Union and Experian (formerly TRW) who collect information about how people pay their bills, put that information into credit reports, and then sell those credit reports to lenders, insurance companies and some employers.

Credit reports are also called "credit ratings" or "credit files." Credit bureaus are sometimes referred to as "credit reporting agencies." They're just different names for the same things.

Below are some commonly asked questions and answers about consumer credit reports and credit scores:

1. How do I get my credit report and credit score?
2. How important is my credit report when I apply for credit cards and other loans?
3. What's in my credit report?
4. How long does information stay on my credit report?
5. You say there are three major credit bureaus. How do I figure out which one has my credit report? And what about the credit bureau here in town - can't I go there if I have problems?
6. What should I look for as I read my credit report?

1. How do I get my credit report and credit score?

   U.S. law requires all three major bureaus provide free credit reports once a year. The ONLY way to access the free reports is to go to www.AnnualCreditReport.com (or call 1-877-322-8228. You may also order by mail, but will need to download a form from www.AnnualCreditReport.com.)

   The Web site goes through step-by-step instructions on how to get your online credit report from each of the bureaus. Each time, you will be asked to verify some information so the bureau will know that you are who you say you are. You may want to have your financial information handy when you're ready to log on.

   Each bureau will provide you with their credit report that shows any items that impact you negatively, your "good" accounts, recent inquiries to your report (regular and promotional) and what they have for your personal information (such as name, address, employment, etc.)

   You'll be offered the chance to purchase your credit score as you order each credit report. You are not obligated to purchase or sign up for anything to get your free report. The free credit reports do NOT include your credit score.

   Each credit bureau has its own scoring system, which you can purchase directly from them; however, the FICO credit score is used most often. A FICO credit score is a snapshot of your credit risk picture at a particular point in time. The higher your score, the lower your risk to lenders. The median FICO credit score is 723. But FICO scores above 760 are ideal for getting the best credit offers. Labor Union members can get their FICO credit score for 15% off the regular price here.

   You'll be able to get your free credit reports from AnnualCreditReport.com every 12 months. You can always buy them more often; they cost $9.00 each and can be purchased online or by phone.

   • Equifax: www.equifax.com or 800-685-1111
   • Experian: www.experian.com or 888-397-3742
   • Trans Union: www.transunion.com or 800-916-8800

   More on credit scores:

   The most widely used credit scores in the industry are those created by Fair Isaac, or FICO. These scores are very similar (if not identical) to the scores a mortgage lender would review to approve you for a home loan.

   If you order your credit scores from sources other than myFICO, you are not likely to get FICO credit scores. Instead, you will get “educational” credit scores that can be quite different. For example, FICO credit scores range from 300 – 850, while some of the educational scores go as high as 950. These educational scores may help you understand ways you can make your credit stronger, but the numbers may be very different than those lenders will use.

   There are a few overall things you will want to understand about credit scores:

   • They are calculated only when someone requests them. That means they can change each time they are created, if the information used to calculate them has changed.
   • They are based on the information available through one of the credit reporting agencies whether that information is correct or not. That’s a good reason to check your credit reports and dispute mistakes. For example, a medical bill that you thought was paid by your insurance company could wind up in collections, and be reported as a collection account on your credit report, significantly damaging your credit.
   • As you may know, when you apply for credit, an “inquiry” is listed on your credit report indicated your credit report was reviewed. Numerous inquiries in a short period of time can hurt your credit, though some types of inquiries (such as those for pre-approved credit offers or when you check your own credit report) don’t affect your score.
   • When it comes to your credit score, it “pays” to use credit. The highest scores go to consumers with established records of using credit and paying their accounts on time. “Avoid credit and your credit score can be as bad as someone who has been through bankruptcy,” warns John Ulzheimer, a former executive of both Fair Isaac and Equifax, and author of You’re Nothing But a Number. That may be even truer under FICO 08, which awards higher scores to consumers who have demonstrated strong payment records on different types of credit accounts, such as credit cards, student loans, vehicle loans and a mortgage.
   • One of the biggest changes under the new FICO 08 formula is that accounts listed as “authorized users” are no longer counted when calculating credit scores. An authorized user is someone who is added to a credit card account so he or she can use the account. Unlike a cosigner or joint accountholder, however, authorized users are not legally responsible for the bills.
   • Scores may be “customized” for individual lenders or for particular industries such as auto insurance or employers.  That is why a credit score of 700 with an auto insurance company many not mean the same as a 700 with a credit card company.  Each industry is looking at the factors important to them and their product or service.
   • There is typically no source for truly free FICO credit scores. Most companies that offer “free” credit scores are offering an introductory trial to a credit monitoring service, and the scores they provide will be educational scores, not true FICO scores.

   Labor Union members get a 15% union discount through myFICO®, on credit scores, credit reports, ID fraud or identity theft protection and personalized score explanation.

2. How important is my credit report when I apply for credit cards and other loans?

   For most lenders, the information in your credit report will make the difference between whether your application is approved or rejected or if you're approved, what rate you get. Lenders want to see how you've handled credit in the past to decide whether you're likely to pay your bills in the future. They almost always look at your credit report to get that information.

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3. What's in my credit report?

   Your credit report contains personal information like your name, spouse's name, current and previous addresses, social security number, and date of birth. Credit reports sometimes also contain employment information, such as where you work and how much you earn.

   The main part of your credit report is credit information - a listing of your credit cards, car loans, mortgages, and other loans; the balances on each, and whether or not you've made the monthly payments on time. It is very important for you to understand this critical section of your credit report. This section can be pretty detailed, and will include other information like your account numbers, when each account was opened, what type of loan each one is (for example a bankcard or car loan), and who is responsible for the bills.

   The next section is public record information such as bankruptcy, tax lien or judgment. Delinquent child support may be listed here as well.
   
   The final part of your credit report is the list of inquiries that shows who has looked at your credit report in the past two years. You may see some inquiries that are described as "promotional" (also known as "soft" inquiries.) That means that your credit report was reviewed for a "pre-approved" credit offer. Promotional inquiries do not show up on credit reports supplied to anyone but you. The same thing goes for inquiries that are there because you ordered a copy of your own credit report (called "consumer" inquiries).

   You might also be surprised at what's not on your credit report. No one is required to report information about accounts to credit bureaus, so some smaller companies, like local retail stores or small credit unions may not bother. Utility bills, rent payments, medical bills, and most gasoline credit cards are not reported to the credit bureaus unless you fall behind on your payments. Standard credit reports also don't include information about race, religion or personal beliefs.

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4. How long does information stay on my credit report?

   Negative information, like late payments, can generally stay on your credit report for seven years from the date the payment should have been made. There are a few exceptions:

   Bankruptcies can stay on your report for ten years from the date you filed, although most credit bureaus will remove Chapter 13 bankruptcies (where you pay back some or most of your debts over a few years) seven years from the date of filing.

   Other negative information (such as late payments, judgments or charge-offs) can remain on your credit report up to seven years and six months from the date the bill was originally due.

   Positive information about bills you paid on time can stay on your credit report as long as the credit bureau decides to keep it there. If you have a lot of credit accounts, a credit bureau may remove some of the older, positive information to make room for the new credit information.

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5. You say there are three major credit bureaus. How do I figure out which one has my credit report? And what about the credit bureau here in town - can't I go there if I have problems?

   Not that long ago, if you lived in the Southeast, Equifax probably had a copy of your credit report. In the West, TRW (now Experian) was the main credit bureau, and Trans Union dominated the Northeast. However, each of the "Big 3" bureaus covers the nation now. So if you have credit cards or loans, you'll probably find that you have a credit file with each of the three major credit bureaus.

   It is essential to understand that your credit report may not be the same with each credit bureau, though. The three major credit bureaus don't share information with each other. Each credit bureau tries to get as many lenders as possible to give them information about people's accounts, so that they can say they have the most complete credit files to lenders. That's why, if you're checking your credit report or trying to fix mistakes, you should look at what each of the major bureaus has in their file about you.

   Working with the local credit bureau in town may or may not be the answer. The thousands of smaller credit bureaus usually work from the databases of one or all three of the "Big 3." If you find the problem, it's usually easiest to straighten it out with the three major bureaus - the local bureaus will get the corrected information from them.

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6. What should I look for as I read my credit report?

   As you read through your credit report and seek to understand all the credit information included, make a list of everything that is incorrect, out-of-date or misleading. In particular, look for:

   • Incorrect or incomplete name, address or phone number
   • Incorrect Social Security number or birthday
   • Incorrect, missing or outdated employment information
   • Incorrect marital status - for example, a former spouse listed as your current spouse
   • Bankruptcies older than ten years or not identified by the specific chapter of the bankruptcy code
   • Lawsuits or judgments older than seven years
   • Paid tax liens or criminal records older than seven years, delinquent accounts older than seven years or that omit the date of the delinquency
   • Credit inquiries older than two years
   • Unauthorized credit (not promotional) inquiries - credit bureaus usually do not remove these at a consumer's request, but it never hurts to ask
   • Commingled accounts - credit histories for someone with the same name
   • Duplicate accounts - for example, a debt is listed twice, once under the creditor and once under a collection agency
   • Premarital debts of your current spouse attributed to you
   • Lawsuits you were not involved in
   • Paid tax, judgment, mechanic's or other liens listed as unpaid
   • A missing notation when you disputed a charge on a credit card bill
   • Incorrect account histories - such as a late payment notation when you paid on time or a debt shown as past due when it was discharged in bankruptcy
   • Closed accounts incorrectly listed as open, and
   • Accounts you closed that don't indicate "closed by consumer."

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