Credit Reports and Scores

Credit reports are summaries of a consumer’s financial history with various credit lending agencies.

When a person applies for a new line of credit through a credit card or mortgage application, the lender uses the applicant’s credit score to determine if she or he is financially trustworthy. Credit scores in the U.S. range from 300 to 850 points. Most people aim to have at least a 700 credit score to be able to access decently priced credit offers.

A consumer’s credit history is explained in detail in a credit report, while a person’s credit score is the accumulation of all of his or her financial actions. Lenders, employers and other entities who run basic background checks may request a person’s credit report or credit score.

Everyone is encouraged to check their own credit score and report regularly and at least once per year. Consumers use their credit reports to protect against identity theft and ensure that their credit history as recorded with the major credit reporting agencies is accurate.

Where to Get Your Credit Report

In the U.S., there are three major credit reporting agencies that most people use to reference a person’s credit history and credit score. These credit bureaus combine different types of financial information in their reports, so consumers can expect to see slight variations in reports received from different agencies.

All credit bureaus incorporate information about a person’s payment history, debt usage and maintenance, number of credit lines, types of accounts and more. The three primary credit reporting bureaus are:

  • TransUnion
  • Equifax
  • Experian

Because each credit bureau uses its own formula for creating their reports and sources its information from unique sources, consumers may find an error in one report that does not exist in another. Similarly, consumers can expect their credit score to fluctuate slightly according to different agencies.

Federal law protects each American’s right to have free access to a credit report from each of the three major reporting bureaus once per year. Multiple credit report requests made within one year can only be accessed by paying a small fee to each of the applicable credit agencies.

How to Get Your Free Credit Report

There are a few different ways that American consumers can gain access to their three free annual credit reports guaranteed by federal law. Most people prefer to head online to the national web portal dedicated to providing consumers with their free annual reports.

The government-recognized website requires applicants to sign up and create a profile that verifies the applicant’s identity before releasing any credit history or score information. At the time of request, applicants can choose whether they would like to access all or just some of their three reports available yearly.

Applicants who have already accessed their annual allowance can purchase additional reports through this website as well. Many consumers choose to order one report at a time throughout the year so that they can regularly monitor their finances without ever having to purchase a report.

Applicants should also note that they can request a free credit report after being turned down for most types of credit lines from the same reporting bureau that issued the report to the creditor.

Factors and Information Affecting Your Credit Score

A person’s credit score is the numerical accumulation of all of his or her financial and crediting history. Each of the three bureaus has their own unique way of coming up with a consumer’s credit score.

Regardless, the resulting score should be very similar between all three agencies all the same. This is because each of the credit bureaus uses the same categories of financial information to create a consumer’s score, including:

  • History of on-time bill payments
  • Number of active and closed accounts
  • Average age of credit accounts
  • Total debt amount owed compared to overall credit limit
  • Collection actions, current and past
  • Delinquency notices and other disciplinary actions

One of the most important factors that can affect a consumer’s credit score is his or her on-time payment history. Given that a credit score is generally used to judge a person’s ability to keep his or her financial obligations, the regularity of a consumer’s past payments is a clear indicator of his or her ability to deal with it in the future.

Another important element used in the calculation of a credit score is the consumer’s ratio of debt usage to debt allowance. Ideally, only about 30% of a person’s credit is utilized at any given time.

How to Quickly Improve Your Credit Score

Unfortunately, credit scores do not generally improve very quickly. It is much easier to ruin a good credit score than to rebuild a score once it has been lost. To quickly increase a credit score, consumers can try to minimize the amount of overall debt they hold at any given time and make sure to pay all bills and fees on time.

Credit holders who have already utilized a high percentage of their credit possibilities are encouraged to use cash or other methods until their credit utilization percentage decrease.

FREQUENTLY ASKED QUESTIONS ABOUT CREDIT REPORTS AND CREDIT SCORES

How can I get errors taken off of my credit report?

Regularly checking your credit report is necessary to catch any errors or fraudulent charges attached to your identification information. If you spot an error, you may have to contact both the creditor who placed the derogatory mark on your report and the credit bureau reporting the error.

Depending on the creditor, you may be able to do this by phone, in writing or online. The three credit bureaus accept requests for report updates with a valid reason online, by phone and by writing as well.  

How long does it take for negative factors to be removed from a credit report?

Negative factors affecting a consumer’s report can remain on record for years after a problem has been resolved. The Fair Credit Reporting Act of 1970 states that derogatory marks can remain on a credit report for up to seven years unless the consumer can make a strong case as to why it should be removed earlier.

Consumers should note that many types of financial actions can still appear in a person’s credit report after this period even if they no longer affect the person’s credit score. Beginning a payment plan to take care of an old debt, for instance, could place that negative account on the consumer’s report once again.

How do I get collections off my credit report?

You may be able to request that collection proceedings be removed from your credit report after payment of the debt by contacting the specific credit provider who is being paid off. Collections that are currently in dispute will not be removed from any credit report.

Credit repair companies may be able to help some consumers figure out how they can structure their collections and settlements to maximize their positive effects on their credit report and score. These agencies can provide step by step advice on how to understand, dispute and ultimately increase your credit score.

How to Remove Missed Payments From a Credit Report

Missed payments can be difficult to remove from a credit report unless the consumer can provide a bona fide reason to the lender for the gap in payment. Individuals with good credit may be able to request a “goodwill adjustment” to their credit report, essentially getting missed payment reports removed due to having a relatively positive overall credit history.

Consumers with several missed payments will face more difficulty getting derogatory marks removed before their seven-year expiration date. Some lenders will allow consumers to negotiate a removal of the report in exchange for signing up for a payment plan.

Can a settled account be removed from a credit report?

Settled accounts are financial accounts that went into default and were later negotiated by the consumer and the lender for a settlement. This settlement is generally at a significantly lower cost than the original debt.

Because settlements indicate that a consumer may be a risky bet from the perspective of lenders, they are very difficult to remove from a credit report before the seven year mark is up.

After this period, the settlement should automatically be removed from the consumer’s credit report. If this does not happen, he or she should contact the major credit reporting bureaus to submit a claim for errors.

Do landlords report payment history to credit bureaus?

Landlords can report both regular and delinquent rent payments to all the major credit bureaus, though not all do. All three credit bureaus have the option for landlords to report payments, whether missed or on time. Those payments are then included in an individual tenant’s credit report.

Many consumers prefer landlords who do report so that they can use their history of on-time rent payments to help boost their credit score. However, making late rent payments to landlords who report will place derogatory marks on the consumer’s report that can last for years.

There are multiple fees associated with regularly reporting to a credit agency, so consumers should check to make sure their landlord follows their preferred reporting method.