Companies collect information about how you use loans and credit cards. They then put that data in a report that businesses can review to assess your creditworthiness.
The reports include personal details such as your name (including any aliases), addresses and phone numbers, and accounts — including balances and payment histories. Public records like bankruptcies, judgments and liens also are included.
Credit bureaus — also known as consumer reporting agencies or CRAs — are businesses that compile information about your financial payment history. They use that data to create your credit reports and the simplified numerical representation of your financial reliability known as a credit score.
Lenders look at your credit reports and scores to determine whether you’re likely to pay back money you borrow. They can also influence your access to loans, credit cards and mortgages and may impact the rates you’ll be charged for those products.
There are dozens of consumer credit bureaus in the United States, including Equifax, Experian and TransUnion. They are for-profit corporations that sell your credit report to lenders, insurers and other businesses as permitted by law. Each company has its own way of gathering and organizing your data, but they all share a few key pieces of information: your personal information, account activity (credit inquiries, credit balances) and public records like judgments and liens.
What is a credit report?
Credit reports are detailed accounts of a consumer’s financial history that can help lenders make more informed decisions about credit card, loan and mortgage applications. The three nationwide credit bureaus — Experian, Equifax and TransUnion — collect data on consumers and package it into organized documents known as credit reports. They also use the information to calculate simplified numerical representations of creditworthiness called credit scores.
Each credit bureau formats and presents information differently, but all include a few key categories: identifying information, credit account history, inquiries and public records like bankruptcies. For example, the identifying information section of a credit report typically lists a consumer’s full name, any names they used prior to marriage and any nicknames or variations on their name (e.g., middle initial or name without a middle name).
The credit account history portion of the report includes open and closed loans and credit cards, as well as up to seven years of monthly payment records. The report also notes whether a debt has been sent to collection agencies.
What is a credit score?
A credit score is a three-digit number that summarizes information from your credit report. Lenders use it to evaluate your creditworthiness and determine whether to approve your loan, credit card or mortgage application. Your credit score combines four categories of information in your credit file: identifying information, credit account history, credit inquiries and public records. Credit reporting companies (Experian, Equifax and TransUnion) compile the data and generate your credit report, which lenders review when making decisions on lending and insurance applications.
Credit scores range from 300 to 850, based on a variety of factors analyzed by credit scoring models. The most influential factor is your credit track record – a credit score considers how long you’ve had credit, how many accounts you have and their current balances, your debt-to-credit ratio, and other information like the status of your accounts (whether they’re open, closed or in collections). It also considers your payment history, which includes on-time payments and late payments.
How can I get my credit report?
Under federal law, you are entitled to one free credit report per year from each of the three major credit bureaus: Equifax, Experian and TransUnion. You can order your reports at different times throughout the year, or you can stagger them.
Lenders typically check your credit report before approving a mortgage, credit card, loan or insurance. It’s also a good idea to review your reports on a regular basis so you can spot errors and identity theft early.
Your credit report and credit score are based on information from your financial accounts, such as loans, mortgages, credit cards and utilities. These accounts are reported to the credit bureaus by the lenders and other businesses that you do business with. The credit bureaus then combine this information to create your report and scores. You can get your credit reports from each of the credit bureaus at no cost by visiting their websites or calling their toll-free numbers.