How to Get and Understand Your Credit Reports & Credit Scores

Revised November 12, 2010

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 website 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.

You'll be able to get your free credit reports from AnnualCreditReport.com every 12 months. You are also entitled to a free copy of your credit reports if you are turned down for credit, insurance, or another benefit due to information in your report. Identity theft victims get two free copies of their credit reports each year. You can always buy additional copies, or subscribe to a credit monitoring service which will alert you to changes in your reports and/or scores.

More on credit scores:

The most widely used credit scores in the industry are those created by Fair Isaac, or FICO. Numerous lenders, including mortgage companies and credit card issuers, use FICO scores to make credit decisions.

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. Higher scores go 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.

There is typically no source for truly free FICO credit scores, unless you are turned down for a mortgage. 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.
 

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.
 

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.

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.
• Collection accounts may be reported for seven years and six months from the date the bill was originally due. That's true regardless of whether the account has been paid off or not.
• Charge-offs may be reported for seven years from the date the account was charged off.
• Judgments may be reported for seven years from the date the judgment was filed.
• And tax liens may be reported indefinitely if they are not paid. Once they are paid, they may be reported for seven years from the date they are paid.

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.
 

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

It is essential to understand that your credit report may not be the same with each of the three major credit reporting agencies. They don’t share information with each other, and lenders may or may not report to all three. That's why, if you're checking your credit report or trying to fix mistakes, you should get your report from Equifax, Experian and Trans Union. While some experts advise staggering your requests for your free credit reports from AnnualCreditReport.com, the problem with that approach is that you may not discover a mistake on one of your reports if you wait to review it.
 

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

As you read through your credit report, 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, such as the same collection accounts listed under two different collection agencies.
• Lawsuits you were not involved in
• Paid tax, judgment, mechanic's or other liens listed as unpaid