Understanding Credit Reports: Your Key to Unlocking Financial Opportunities

Credit impacts nearly every aspect of your life. Good credit can help you get better interest rates and terms on loans, secure a mortgage, and even help you rent an apartment.

The first step to building good credit is regularly reviewing your credit reports.

Where to get your credit report

The Fair Credit Reporting Act (FCRA) is a federal law enacted to ensure fairness, accuracy and privacy in how consumer credit information is collected, shared and used.

Under the Fair Credit Reporting Act, you can access your credit reports under specific circumstances. For instance, you can request a free report if you're denied credit. You can also access your credit reports from the three major credit bureaus—Equifax, TransUnion and Experian—once a year free through Annual Credit Report.com.

Your free credit reports do not include your credit scores, but you can purchase those through the credit bureaus.

What’s in your credit report?

Your credit report consists of four main sections.

Identify information

This section of your credit report includes basic identification details such as your name, current and previous addresses and Social Security number. While this information typically doesn't impact your credit score, accurate information is ideal.

Account history

The account history section provides a detailed look at your credit accounts, including credit cards and loans.

It includes information like:

• Account status (whether the account is opened or closed)
• Account age (how long the account has been open)
• Payment history
• Balance
• Credit limit

Typically, creditors update this information monthly for active accounts. Closed accounts—including charge-offs or those in collections—stay on your credit report for seven years after closure.

Public records

This section lists financially related data from public records, such as bankruptcies, judgments and tax liens. It's worth noting that it doesn't list arrests or criminal convictions.

Credit inquiries

Inquiries on your credit remain on your credit report for two years, but not all inquiries impact your credit score.

Your report may contain three types of inquiries:

• Hard inquiries: When you apply for credit, such as a loan or credit card, the lender typically requests a copy of your credit report. These inquiries are known as hard inquiries or hard pulls. Hard inquiries can impact your credit score, although the impact is usually minimal and temporary.
• Soft inquiries: Soft inquiries, also known as soft pulls, occur when your credit report is accessed for non-lending purposes. This can include background checks, pre-approved credit offers or when you check your credit report. Soft inquiries do not impact your credit score and are not visible to lenders or creditors reviewing your credit report.
• Shopping period inquiries: When you're actively shopping for a specific type of credit, such as an auto loan or mortgage, multiple inquiries within a short timeframe for the same kind of credit are often treated as a single inquiry. This recognizes that consumers may need to compare various offers and prevents multiple inquiries from significantly affecting their credit score. The specific timeframe for this shopping period can vary, but it's typically around 14-45 days, depending on the credit scoring model used.
  
  

Have questions about your credit reports or credit scores? Schedule some time with one of our Representatives to talk through your unique situation. We’re here to help guide you every step of the way.