What Is a Credit Report?

A credit report is a detailed breakdown of your credit history prepared by a credit bureau. Credit bureaus collect financial information about you and compile their reports based on that information. Lenders use the reports, often along with other data, to determine your creditworthiness. Insurance companies, employers, and landlords may check your credit reports, as well.

How Credit Reports Work

In the United States there are three major credit reporting bureaus: Equifax, Experian, and TransUnion. Each of these companies collects information about your credit history to create a unique credit report on you. Although most of their information is similar, there are often small differences among the three reports depending on which of your creditors, such as mortgage lenders and credit card companies, provide information to that particular bureau. Some creditors may supply information to one or two bureaus but not all three, and some may not supply any information on you at all.

What Information Is in My Credit Report?

Credit reports typically divide information into four sections. These are:

1. Personal Information: The top of the report contains personal information to identify you, including your name (and any variations of your name that you use), address, date of birth, spouse or co-applicant, and phone numbers.
2. Accounts: The second section represents the bulk of most reports and includes detailed information on your past and present credit accounts, both revolving credit, such as credit cards and lines of credit, and installment credit, such as auto loans, personal loans, and mortgages. It will indicate when you opened the account as well as its current status, such as whether it is open or closed. In addition, and most importantly, it will show whether you have kept up with your payments on that account or fallen behind.
3. Public Records: The third section includes public records regarding any bankruptcies, legal judgments, or tax liens. It does not include non-financial matters, such as arrests.
4. Credit Inquiries: The bottom of the report lists all of the entities that have recently asked to see your credit report. These fall into two categories: hard inquiries, which happen when you apply for credit, and soft inquiries, which occur when a potential creditor requests your file without your knowledge for marketing purposes. Hard inquiries can have a negative impact on your credit score, although it is usually brief.

Credit Reports and Credit Scores

Credit scores are three-digit numbers, typically ranging from 300 to 850, that serve as a sort of shorthand for your creditworthiness. The information in your credit reports is used to compute your credit scores, but the scores themselves are not part of your report and must be obtained separately.

Credit scores are computed using formulas developed by FICO or a competitor such as VantageScore. They assign different weightings to the information in your credit report, to reflect its importance and predictive value. A typical FICO score breaks down like this:

Payment history: 35%. This reflects whether you pay your credit bills on time.

Amounts owed: 30%. This looks at factors such as your credit utilization ratio, which compares how much debt you have outstanding to the total amount of credit you have available to you. Generally speaking, the lower that percentage, the better.

Length of credit history: 15%. Older accounts count for more than newer ones.

Credit mix: 10%. The credit scoring models favor individuals who've had a variety of credit types (such as a credit card and a car loan or mortgage) and used them all responsibly.

New credit: 10%. If you've taken on a lot of new credit lately, lenders can see that as a red flag.

The Bottom Line

Your credit reports contain information that lenders, insurance companies, and others will use to judge you. For that reason it's important to check your reports periodically to make sure the information in them is correct. If you find errors, you have a right to dispute them, and the credit bureau is required by law to investigate the matter and get back to you.