Your credit report explained: What's on it and why does it matter?

That’s because it has a massive impact on your life, affecting your ability to get approved for loans or credit cards, the interest rates you'll be offered, and even your ability to buy or rent an apartment. Here, we explore what a credit report is, why it's important to check it regularly and ways you can keep track. 

Your credit report is a detailed record of your credit history, including information about your loans, credit cards, and payment history. There are three major credit bureaus: Equifax, Experian, and TransUnion which collect information from lenders and creditors and compile it into a credit report. Your report contains information such as your name, social security number, address, and employment history as well as a list of your credit accounts, their balance, credit limit, and payment history. Late payments, bankruptcies, and collections can be listed too. 

Your credit score is a three-digit number that is derived from the information on your credit report. Credit bureaus generate your credit score based on their individual criteria (meaning it can differ depending on the bureau you check). They’re also used by lenders to determine your credit risk.

Your credit report can have a huge impact on your life in several ways. Here are just a few examples:

Your credit report will show any errors or suspicious activity on your accounts, like loans that you didn’t apply for, which can cause problems when you try to apply for credit. Keeping an eye on your credit report regularly can help ensure accuracy and identify any potential errors or fraudulent activity.

Lenders use your credit report to determine your creditworthiness, which affects whether they approve you for loans or credit cards. A high credit score can help you get approved for loans or credit cards, while a negative credit report can make it more difficult to get approved or result in higher interest rates.

Landlords often check credit reports when deciding whether to rent an apartment to someone to check that they will be able to make payments.

Mortgage lenders will use your credit report to help decide if you’re financially strong enough to afford monthly mortgage payments. It’s worth keeping in mind that every application you make goes on your credit report and several in a short period of time can reflect negatively on you, so it’s a good idea to plan your applications with that in mind. It’s always a good idea to check your credit report some time before applying for a mortgage so you know how it looks and can make any changes to improve your chances before applying. 

Keeping track of your credit report is fairly easy if you know where to look. Here are some tools that can help: 

In the US you’re entitled to a free copy of your credit report from the three major bureaus (Equifax, Experian, and TransUnion) every 12 months. The FTC states that annualcreditreport.com is the “only website authorized to fill orders for the free annual credit reports you are entitled to by law”. The three bureaus have slightly different criteria so it’s worth looking at all three rather than just one. 

There are free and paid apps on the market like Credit Karma and Credit Sesame that claim to help you monitor your credit. What works for you will depend on your own needs so it’s best to do your own research on personal finance apps and see what appeals. 

Some banks partner with the major bureaus to offer their customers access to their credit report. Some can include a feature on the app which is updated monthly. It’s a good idea to do some research to see if your bank offers this. 

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