If you've ever been confused about credit scores and credit reports, you're not alone. These two terms sound alike, yet they represent two different components of your credit.
Where your credit score is a three-digit manifestation of your credit health, your credit report is a detailed account of your credit history. To make things more complicated, the details in your credit report are used to determine your credit score.
In that respect, you might be wise to focus your energy on your actual credit report if you want to improve your credit. Keep reading to learn more about credit reports, why they matter, and how you can access a copy of your report for free.
What is a Credit Report?
As we already mentioned, your credit report is a detailed account of your credit history. Nearly every credit movement you've made is listed on your report, including any time you've opened a new line of credit, closed an account, made a payment, or paid late. As the Federal Trade Commission (FTC) notes, your credit report will also include information on where you live, how you pay your bills, and "whether you've been sued or have filed for bankruptcy."
Per myFICO, your credit report may also include:
- Identifying information such as your social security number, date of birth, and employment information
- Credit line details, including account balances and credit limits
- Credit inquiries and related details
- Public record and collections, including information from state and county courts, information on overdue debts, and details on foreclosures, wage attachments, and judgments.
Add these details together and you'll see that a credit report is nothing more than a comprehensive record of your financial movements. Basically, every credit move you make – good or bad – will eventually make its way to your credit report. If your goal is boosting your credit score over time, you should make sure your report includes much more positive news than negative. By and large, the best way to do this is to limit debt, pay all of your bills on time, and avoid opening or closing accounts too often.
Why Does Your Credit Report Matter?
Because the details in your credit report help the credit reporting agencies determine your credit score, the tiny details your report contains may matter more than you think. If you ever plan to borrow money for a mortgage, take out a loan for a car, or raise cash to start your own business, the details in your credit report can literally make or break you.
While a good credit score and a positive credit history can help you qualify for a loan with the lowest interest rate and best terms, poor or fair credit might make it difficult to qualify for the financing you need. And even if you do qualify with poor credit, you may need to pay a higher interest rate and more fees to compensate for greater risk.
How Do I Get a Copy of My Credit Report?
To gain an understanding of how your credit score was determined, you should get your hands on a copy of your credit report right away. Fortunately, this is easy due to new rules enacted by the federal government. As the FTC notes, the Fair Credit Reporting Act (FRCA) now requires each of the credit reporting agencies to provide you with a free copy of your report every 12 months.
The three credit reporting agencies – Experian, Equifax, and TransUnion – offer access through a central website, AnnualCreditReport.com. You can also get a copy of your report via telephone or mail by calling 1-877-322-8228 or mailing an Annual Credit Report Request Form to - Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
In addition to snagging a free copy of your credit report, you can also use Lending Tree to get a free estimate of your credit score. Sign up here to find out where you stand, learn the major factors that determine your score, and determine whether you could save on monthly bills.
What if I Find an Error?
If you get a free copy of your credit report and discover an error, it's on you to make it right. Simply fill out an online dispute form with the credit reporting agency showing an error - TransUnion, Equifax, or Experian - and include a sample letter that describes the error in detail.
From there, the credit reporting agency typically has 30 days to investigate your claim and provide you with a response. If a response is issued in your favor, the questioned items will be deleted from your credit report or corrected appropriately.
Your credit report is a behind-the-scenes record of every credit movement you make. That's why it's essential to keep an eye on your credit report and its contents to ensure accuracy.
The first step, however, is understanding the importance of your credit report along with how you can access this information for free. Like it or not, your credit report might be the key to everything you want in life. Treat your credit with kid gloves and you'll be a lot better off.