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The Credit Report

This page will cover the basics of a Credit Report and how to obtain a free report from each of the reporting bureaus. The page, The Credit Score wraps up with a discussion of some of the common events that may lower a credit score and some tips on how to improve a credit score.

The Credit Report

The credit report is the basis upon which potential borrowers are assessed. This can affect interest rates offered, possible extra points a mortgage borrower may have to pay, and whether or not the potential borrower can be approved for a loan. Anyone with a social security number or tax ID in the United States has the right to download one free credit report from each of the three big credit bureau’s once every 12 months. Many websites will offer “free credit reports,” but they usually require credit card information and will enroll the user in a credit monitoring service, complete with recurring monthly charges, until the consumer cancels. Figuring out how to cancel this service is often difficult and time consuming.

In 2003, the Fair and Accurate Credit Transactions Act (FACT) was established. This Act allowed consumers to access their free credit reports, once a year, with no strings attached.

Anyone can go to to instantly download their free credit reports. If web connections or Internet security is a concern, consumers have the option of calling in or mailing a form to the Annual Credit Report Service:

For calling in this form: 

(877) 322-8228

For mailing a copy of this form:

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

Anatomy of a Credit Report

Credit reports are assembled and maintained by three major credit reporting bureaus:

There are other credit reporting bureaus, but they are not used nearly as frequently as these three titans. These credit bureaus collect information about a person’s credit history: credit cards, auto loans, student loans, mortgages, judgments, and so on. They maintain this credit history for years, but the last two years (24 months) is the timeframe of the most importance.

Of particular interest are the following sources of credit:

Revolving Credit: Credit Cards and Retail Accounts (store credit cards).

Installment Loans: Loans with regular payments, like car loans or student loans.

Finance Company Accounts: These are high interest loans that are generally offered to high-risk borrowers. These types of accounts are also commonly offered to consumers who wish to finance furniture, appliances, elective medical procedures, etc. They may have zero-interest “same as cash” offers if paid in full within X months. If a borrower does not pay in full, the interest rates are significantly higher than market rates. Having this type of credit is not generally seen as a favorable item on a credit report.

Mortgage Loans: First mortgages and larger home equity loans.

One important benefit from obtaining the free credit reports once a year is to check if any identify theft occurred. Are there credit accounts that were opened fraudulently? Are credit balances higher than expected? Have there been credit inquiries from organizations unknown to the individual?

Click here to open a sample credit report.

Taking a look at a sample credit report from shows many items that can appear on a credit report. The credit bureaus are highly accurate, but there may be some inaccuracies or inconsistencies in credit reports. It is a good idea to obtain all three of the free reports once a year to verify that the information is correct and to see if there has been identity theft.

The top of the report contains the name and contact information of the subject individual. Next is a section on Potentially Negative Items. This may include late credit items, bankruptcy, liens, and court judgments. This section shows the source and amount of indebtedness.

Ideally, there would be nothing in this section, but if there is, it is in the best interest of this individual to get these items paid.

Next are Accounts in Good Standing. Having some debt is not necessarily a cause for alarm. Being able to manage some debt in a responsible way establishes a credit history. This section lists all sources of credit going back for 5 years or more. Many of these accounts may be closed, but will still appear on the credit report. For open accounts, the Credit Limit, Current Balance, and 24 months of Payment History will be listed. As stated earlier, the last 24 months are very important months on a credit report. Late payments over the last 24 months are included and coded as 30 Days Late, 60 Days Late, or Over 90 Days Late. Items are generally reported late once the grace period after the due date has passed.

If a mortgage borrower has the opportunity to spend 2 years improving their credit report, one key component is to confirm that they pay at least their minimum payment on time for every account they have.

Also included on the report is a History of Credit Inquiries. There are many instances where companies will wish to check a credit history. Sometimes, these credit checks are directly authorized by the individual. Other times, a person has no idea that their credit has been checked. The credit checks are divided into two sections to reflect this. The first section contains credit checks directly authorized by the individual. This happens when someone applies for store credit, a loan, or even fills out an application to rent housing and authorizes the landlord to do a credit check.

On the other hand, sometimes companies do credit checks without the individual’s knowledge. This commonly occurs if an individual does not “opt out” of special offers.

The last section has the contact information on file for the individual, along with their employer and a section for the individual to make a statement about anything on the credit report.

Credit reports provide a detailed account of a person’s credit history and current standing. In the past, creditors would look at an entire report to make their own judgments on the creditworthiness of a credit applicant. Looking at the sample credit report, you may have noticed that it looks completely different than your report. There is a lot of variation from person to person. It is difficult to have consistent standards when deciding on whether to grant credit or not. Credit scores were developed to calculate a more consistent measure of creditworthiness. They are not included in a credit report.