Why is your credit report important?
- August 17, 2019
If you have ever borrowed money from a bank or lender before, you have a credit report. This important document follows you throughout your life and affects you in ways that you may not even realize.
Many people assume their credit report only affects their ability to get financing and current mortgage rates, but it does much more. Future employers, landlords, and insurance companies may also view your credit report to get a feeling for your level of financial responsibility before making a decision on your application.
Your credit report is one of the most important documents that you’ll use repeatedly in your adult life. Keep reading to learn why it’s important and how you can view it.
Your credit report is a trail of all financial transactions you’ve made since you became an adult. It includes all credit accounts that you have now as well as in the past. It includes public records of things like bankruptcies or judgments. It also includes information on any foreclosures or repossessions you’ve had.
Your credit report also includes other non-financial information:
- Personal identifying information including your name, address, birthdate, and social security number
- Information about your current and past employers
- List of your previous addresses
- Any other spellings of your name that have been on any financial documents
Your report also includes a list of businesses that recently inquired about your credit score. Inquiries typically stay on a report for two years, but they only affect your credit score for a few months. That said, your score won’t be affected if you incur several inquires from mortgage companies inside a 15 day window, allowing you the ability to shop around without credit consequences
Who Reports the Information?
There are three credit bureaus that provide the credit information on your report – Experian, Equifax, and TransUnion. Each bureau has its own report. Most companies send information about your debt with them to each of the three credit bureaus, but sometimes they only report to one or two bureaus.
Banks and lending companies send information to the credit bureaus on a monthly basis. The companies that don’t report on a monthly basis may only send delinquent credit information to the credit bureaus to report on your credit report. Many utility companies operate this way. They don’t report regularly, but if you make your payments more than 30 days late, it will show up on your report.
Why is your credit report important?
If you pay your bills on time, you may wonder why you should care about your credit report. You know you’ve never paid a bill late or went over your credit limit, so what’s the big deal? There are a couple of reasons you should check often:
- Your credit report may have errors – Humans make mistakes. One mixed up number can ruin your credit score and your ability to get loans down the road. Catching the errors early gives you time to get it corrected. It also gives your score time to update appropriately.
- Someone may steal your identity – Your information could be out on the dark web without you knowing it. Typically, it’s not until you start getting collection phone calls or strange bills in the mail that you realize your identity was stolen and the damage is done. Of course, the now infamous Equifax credit data breach is yet another way your identity may get into the wrong hands. Checking your credit report often helps you catch identity theft early.
Even if you don’t think you will apply for new credit anytime soon, you may still use your credit report more than you think.
- Are you applying for a new job? Your employer may check your report. This is especially true if you work in a financial field or apply for an executive position. Employers look at credit reports to gauge your level of responsibility. If you have a lot of late payments, bankruptcies, or foreclosures, it could affect your ability to get a new job.
- Are you trying to rent? Landlords also look at your report. They want to know how responsible you are with your bills. While you may not think a late credit card payment should keep you from renting an apartment, the landlord wants to know that you will pay your rent on time.
How to View Your Reports
You have access to each of your credit reports for free. Each credit bureau must provide you with a copy of your report one time per year. You can obtain it from https://www.annualcreditreport.com.
Use the following steps to check your credit:
- Click ‘Request Credit Reports’
- Fill out the form with your personal information
- Choose which reports you want (Equifax, Experian, or TransUnion)
It’s that easy! You can choose all three credit reports at once, or you can spread them out over the course of the year. Since there are three bureaus, you can request one report every four months and cover the course of the year, catching all errors or issues right away.
A Credit Report Isn’t Your Credit Score
Keep in mind that the credit report you see from www.annualcreditreport.com doesn’t include your credit scores. It’s a report of all activity but without the score itself. You may have access to your actual credit score through your credit card companies or bank – many offer free credit score updates on a monthly basis.
Checking your report, though, gives you more information. You see what potential lenders see. If there are errors, you can request that the credit bureau fix them by providing evidence of the mistake. Checking your credit score just lets you know if your score increased or decreased for the month, but you wouldn’t know why.
Check Your Report Today
If you haven’t checked your credit report recently, it’s time to order your free report. Go over each line carefully to make sure all information provided is accurate. You deserve fair, transparent, and unbiased lending practices, but it all starts with an accurate credit report that makes lenders want to lend to you. At Achroma, we are here to help you understand your credit report to increase your chances of securing the mortgage you desire. If you have a good sense of your credit score, you can see how that may impact current mortgage rates. And if you’ve already created an account at Achroma you can use our interactive guides on your dashboard.