Credit Reports


Credit reports, and corresponding credit scores, provide lenders, insurance companies, and even potential employers with a record of how an individual manages his or her finances. Three credit bureaus track and record the credit histories of individuals in the U.S. When an individual applies for a mortgage, a loan or a credit card, the credit record from one, two or all three companies is reviewed by the credit card company or potential lender.

The Importance of Good Credit

If an individual’s credit reports show that he or she pays bills on time, does not carry an excessive amount of debt and generally maintains finances well, chances are that the credit score associated with the credit report is high. Good credit is important because lenders base the decision about whether or not to lend to a borrower based on the credit report. The better the potential borrower’s credit record, generally determined by a FICO score, the lower the interest rate that will be applied to the loan, in most cases. The lower the interest rate on a loan, the less the loan will cost over the life of the loan.

For example, a person with excellent or good credit will qualify for low interest loans. If the person takes out a loan for $1000 with 1 percent interest, this person will pay a considerable amount less to borrow the money than a person who borrows the same balance with a 5 percent interest rate. Over the life of the loan, it costs the person with good credit much less to borrow the money. Individuals with good credit ratings pay less interest on mortgages, car loans and personal loans. They qualify for “no interest” specials and they will be offered better rates on their insurance. Someone with good credit saves a considerable amount of money over their lifetime in reduced costs and interest rates than the person with poor credit.

How Credit Is Tracked

Credit histories are tracked by three companies in the U.S. Experian, Equifax and TransUnion are the three credit bureaus that track credit and evaluate credit scores. Creditors may report payment histories of customers to one, two or all three credit bureaus. Lenders subscribe to at least one of these three agencies. Large lenders, such as those who offer mortgages, often subscribe to all three companies.

What is in a Credit Report?

According to, the website created by the company that created the FICO score, the credit report consists of four types of information: Identity information, trade lines, credit inquiries and public/collection records.

– Identity Information

An individual’s credit history is generally tracked using their name, social security number and addresses. This information identifies each unique individual to ensure that his or her credit history is accurately tracked. When someone’s identity is stolen, this means that an identity thief has gained access to the person’s identifying information that is tracked by the credit bureaus. Using this information, the identity thief may open credit accounts, assume the person’s identity to steal money out of existing accounts or perform other activities, such as obtaining types of identification documents. This is why it is important for everyone to check their credit report with all three agencies on a regular basis. Identity theft has become a multi-billion dollar problem in the U.S. Keeping track of all of the accounts listed on a credit report is one way an individual can ensure that no one has gained access to their identifying information.

– Trade Lines

The trade lines section on a credit report lists each credit account. The company name, the account number and a history of payments is listed for each credit account. The information also includes the data the account was opened and if any payments have been late or missed. The Trade Lines section is the section that is most important to lenders and others who check the credit histories of individuals. The Trade Lines section tracks every payment due, every payment made, every late payment, every missed payment and every charged-off account for the individual. However, not all creditors report their trade line data to all three credit reporting agencies. This is why credit reports differ in the information that is tracked for one individual.

– Credit Inquiries

Each time a potential lender, a potential employer, an insurance agency or another company requests an individual’s credit report, the request is recorded on the individual’s credit report as a “credit inquiry.” Excessive credit inquiries can affect the individual’s credit score, which is why many financial experts recommend that people be conservative when allowing inquiries about their credit reports.

– Pubic and Collection Records

Public information that is collected by credit reporting agencies include information such as judgments, liens and bankruptcies. When an individual files for bankruptcy, the filing remains on their credit report for as long as 10 years. However, if a Chapter 13, or a reorganization of debt, is filed, certain accounts may be paid off over the course of several years. These payments will be reflected in the individual’s credit report.

Credit reporting agencies also list all accounts that are listed with collection agencies. Accounts that have been turned over to collection agencies are particularly troublesome for lenders. However, if an account is submitted to a collection agency, the individual is often able to work with the agency to pay a reduced amount to clear the debt. Once the debt is paid, this information is recorded on the credit report.


FICO Scores

Credit bureaus evaluate the credit histories of individuals and assign scores based on their payment histories, amount of debt, number of accounts and other factors. The FICO score is the most common credit score assigned to credit records and used by lenders. The FICO score implements a proprietary formula to assign a number between 300 and 850 to an individual’s credit record. When someone refers to “the credit score,” the person is generally referring to the FICO score. However, lesser known scores are also available for creditors and evaluators to use to determine an individual’s creditworthiness.

The Vantage score was developed in 2006 by all three credit bureaus to compete with the FICO score. However, the FICO score is still considered to be the gold standard in credit scoring formulas. The Vantage score is the second-most popular credit scoring formula next to the FICO score. However, only 10 percent of credit score consumers use the Vantage score. Other credit scoring methods are available, though not widely used. The PLUS score was developed by Experian. This score is meant to be used as an educational tool. The PLUS score is the score that is freely available to individuals any number of credit report sites.

FICO Score Ranges

Very few people have FICO scores over 800. On the other hand, very few people have credit scores below 400. The vast majority of Americans have FICO scores between 600 and 720. Generally, a FICO score over 630 is considered to be “good credit.” A FICO score in the 800s or upper 700s is generally considered to be “excellent credit.”

How to Obtain Your Credit Report

Each credit reporting agency offers each consumer one free copy of their credit report each year. You can obtain a free copy of your credit report from all three credit bureaus by visiting This site allows you to enter your information once and access your credit report from all three agencies at one time. However, you may also request your annual free credit report by calling each credit bureau or sending a request form by U.S. Mail. You can download the request form and find the address of Annual Credit Report at All three agencies now refer individuals to the Annual Credit Report company for their free annual reports. The phone number to request your free reports from all three agencies is 1-877-322-8228.

You can also request a free credit report if you have been denied credit based on your credit report from one of the reporting agencies. The letter of denial provides information about how to obtain your free copy of the report. You must request the report within 45 days of the denial.

All three credit bureaus also offer programs and services that will help you monitor your credit rating. Free trials are offered for some of these services. Check each of the credit bureau websites to review the programs and services they offer to consumers. It is important to regularly monitor your credit report so that you are aware of inconsistencies, errors or problems with the data that is reported on your credit report. Each credit bureau provides a way for you to report errors or mistakes on your report. Check the company website for the credit agency for more information.