It includes information about your credit accounts—such as the type of account, the date it was opened, your credit limit or loan amount, your account balance, and payment history—as well as any public records or collections that are in your name.
But how do all of these details, which collectively provide lenders a snapshot of your financial and credit life, wind up in one report?
The inner workings of your credit report
The information in your credit report comes directly from companies that have extended you credit in the past or from those with which you have open accounts. Credit card companies, banks, credit unions, retailers, and auto and mortgage lenders all report the details of your credit activity to the credit reporting agencies (CRAs).
CRAs also receive information from debt collectors, and they purchase public records, such as bankruptcies, tax liens, and judgments, from public record providers.
Your creditors report the status of your accounts to Equifax and the other national CRAs according to your payment history, which is the largest factor used to determine your credit score.
If you regularly pay your bills on time, your creditors will report that positive information, which then will reflect positively on your credit score. But if you start to pay late or miss payments altogether, your creditors will also report that negative information, which could lower your credit score.
As you build up your credit history over time by opening new accounts and paying your bills, the CRAs will continue to collect and maintain a timely history of your credit activity.
Your credit score is a moving target. It is updated each time there is a request for a score, and new information received also impacts the model.
If you pull your credit report from each of the three national CRAs, you may find the information to be slightly different. This is because not all creditors report to all three agencies. While most creditors do report to all three, you may hold an account with a creditor that only reports to one, for example, or a creditor that doesn’t report to any.
Additionally, each CRA has its own model for evaluating the information in your credit report and assigning you a credit score. As a result, your score may vary between the three national CRAs—even if all of your creditors report to all three agencies.
Regularly monitor your credit report
You should regularly review your credit report to ensure the information it contains is accurate and up to date because an error could affect your credit score and the way you are perceived by lenders. You can order one free copy of your credit report every year from each of the three national CRAs through AnnualCreditReport.com.
As you comb through your credit report, make sure all of your account information, including your personal details, is correct.
If you do find an error, contact the CRA reporting the mistake and file a dispute. At Equifax, for example, you can file a dispute online, by phone, or by mail.
Following an investigation, the CRA will either update the disputed information—you may be informed that the creditor reporting the information verified that it was correct—or delete the error from your file.
If you do have negative information on your credit report, such as a late payment or an account in collections, you can work on improving your credit score over time by paying your bills when they are due and by keeping your account balances low.
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