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Credit Report & Score Services
Frequently Asked Questions about credit report and score services.





In the United States, credit files on individuals are kept by three different credit bureaus: Equifax, Experian and TransUnion. All three are private-sector, for-profit companies. The credit files they maintain contain extensive information on you and your credit history. The information is obtained mainly from lenders, creditors, insurers, employers and other institutions with which you may have a financial relationship. Any company that issues you any type of loan (such as a mortage or car loan) or credit card reports to at least one and often all three credit bureaus each month. They give the bureaus the latest status of your relationship with them including your outstanding balance and whether you have paid on time. The bureaus then keep all of this information in your credit file. Information about you is also obtained from public records. In addition, any time you apply for credit and a creditor requests your credit report from one of the bureaus (a "hard inquiry"), that information goes into your credit file as well. A credit report is simply a compilation of all the information contained in your credit file. Because not all lenders, employers, etc., report to all three bureaus, you actually have 3 different credit reports at any one time - one each from Equifax, Experian and TransUnion. Each credit report changes regularly as the credit bureaus receive new data.

Any time you are applying for new credit, such as in a credit card application, the creditor requests your credit report from one or more of the credit bureaus. The creditor then uses that information, along with your income and other data, to evaluate whether they want to offer you credit, and if so, how much. This type of request by a creditor for your credit report is known as a "hard inquiry" (as opposed to a "soft inquiry"). Hard inquiries themselves show up on your credit report and can affect your credit score. If the creditor does grant you credit, they then report back to the credit bureaus monthly, and the cycle continues.

Information that IS included in your credit report:

Personal Information: Compiled from credit applications you've filled out over the years, this information typically includes your name and any previous names used, your current and previous addresses, telephone number(s), social security number, date of birth and current and previous employers.

Credit Information: This information mainly consists of specific account information from your current and past credit accounts as well as accounts that list you as an authorized user. Included is the date each account was opened, the credit limit or amount of the loan, the payment terms, the balance, and monthly payment history. Most negative information (such as late payments) will remain on your credit report for seven years, while positive information can remain indefinitely.

Public Record Information: These are matters of public record obtained from government sources such as courts of law and can include items such as bankruptcies, tax liens and overdue childs support. Chapter 7 bankruptcy filings remain on your credit report for 10 years while Chapter 13 filings remain for 7 years. Unpaid tax liens remain for 15 years or more if left unpaid, but only 7 years from the date the lien is paid. Most other public record information remains for 7 years.

Inquiries: Credit bureaus record a "hard inquiry" in your credit file any time a third party, such as a lender, credit card company or landlord, request your credit report in order to grant you credit. These hard inquiries are typically only made when you are requesting credt. If you have too many of these hard inquiries in a short period of time, it can negatively affect your credit score. Hard inquiries remain on your credit report for two years. A "soft inquiry" is when a lender requests your credit report for marketing purposes when you are not requesting credit, such as to offer you a preapproved credit offer. Soft inquiries do not affect your credit score and do not show up on credit reports given to third parties, although some credit bureaus will include them for informational purposes only on your own credit report that they provide to you.

Information NOT included in your credit report: A credit report does not include any information about your checking, savings or brokerage accounts or any information that occurred past the time limits described above. It also does not include any criminal records or information about race, relgious preference, medical history, lifestyle, etc. Your credit score is not included in your credit report, but it is generated from information contained in your credit report.

Anyone with a "legitimate business need" can gain access to your credit report. This includes a very wide range of businesses. In most cases they do not need your consent to get your credit report. Examples of types of companies that typically get access to your credit report are any creditors (such as credit card companies), lenders (such as mortgage lenders), employers and potential employers (but only with your consent), insurance companies, landlords, courts, those considering your application for a government license or beneift, state or local child support enforcement agencies, any government agency (limited usually to your name, address, former addresses, current and former employers), cell phone companies and utility companies.

Companies have built formulas to turn the information in your credit report into a number that represents how good of a credit risk you are. These numbers are called credit scores. Most credit scoring systems use the same numerical range which is between 300 and 850. The higher the score the better. According Fair Isaac, the company that produces FICO scores (the most widely used credit scores), the distribution of credit scores in the U.S. is as shown below:

FICO Chart

Credit scores are an extremely important part of how lenders evaluate the likelihood that you will pay back your loan on time, but they also use other information when deciding whether to grant you credit and how much to grant you. While different creditors will evaluate scores differently and there are no hard and fast rules, some general guidelines for what scores mean are shown below. Keep in mind that other factors will also affect the type of credit you might be eligible for.

  • Over 750: Excellent - you should be eligible for any type of credit you want at the best rates
  • 720-750: Very good - eligible for almost any type of credit and usually will get the best rates
  • 660-720: OK - you will be able to get most types of credit but will often not get the best rates or products
  • 620-660: Below Average - you will still be able to get credit in a lot of cases but will have to pay higher interest rates than others
  • Below 620: Bad Credit - you will have difficulty obtaining credit and when you get it your rates will be high

Unfortunately, it is not as simple as each person having one credit score. Since the scores are calculated based on the information in your credit report and you have three different credit reports (one from each of the 3 credit bureaus), you know that you will have three different credit scores. Furthermore, there are a lot of different formulas to calculate credit scores. FICO is the most widely used formula but each of the credit bureaus also has their own formula, as do countless other companies. Many lenders with whom you have a relationship calculate a custom score based on the additional information they have about you outside of what is in your credit report. So for each different credit score formula, you will have 3 different credit scores. And since there are many different formulas, that means you will have lots of different credit scores. The credit scores you receive from the credit monitoring services we recommend at NextAdvisor.com are either FICO scores or the credit bureaus' scoring system we tell you which one in our description of the service. In general, it is best to get your FICO score because that is the most common score that lenders use. However, the other types of scores are typically very similar to the FICO score. Also keep in mind that just as your credit report gets new information all the time, the credit scoring formulas are using that new information to recalculate your score, so your score changes over time.

There are three primary reasons why your credit report and score can have a huge impact on your life:

First, companies use it to decide whether or not they want to lend you money to buy a house or car, give you a credit card, lease you an apartment, give you a cell phone plan, give you cable without having to prepay, and countless other important decisions that have a huge impact on your quality of life. If you have a solid credit history as indicated by your credit report and credit score, chances are companies will be willing to work with you on all these services. If you do not, chances are you will have a hard time getting even the most basic services without having to pay for them in advance.

Second, companies use your credit report to decide the interest rates that they charge you on loans, the interest rates they charge you on credit cards and interest rates on any other type of loan or credit you get. This means that having negative information on your credit report can literally cost you thousands of dollars a year. Lenders and creditors typically use a credit score to make these decisions, which is calculated from information on your credit report. Let's use an example. Say you are buying a house and want to get a $216,000 mortgage. If your credit score is over 760 (indicating excellent credit), your interest rate based on current rates would be around 5.86%, which on a 30-year fixed-rate mortgage would give you a monthly payment of $1,276. On the other hand if your credit score was 630 (not very good but good enough to get a mortgage), your interest rate would be around 7.45%, giving you a monthly payment of $1,503. That's a difference of $227 per month, $2,724 per year and $81,720 over the life of the mortgage! We are not talking about small numbers here! Of course if your credit score was below 600 you probably would not be able to get a mortgage at all and would never be able to buy a house in the first place.

The third primary reason you need to know what's on your credit report is identity theft. Identity theft is one of the most common crimes today and is a billion dollar industry. In addition to monetary loss, victims of identity theft also suffer by having their credit histories decimated, leaving them with very low credit scores, unable to be offered any credit and even having current credit revoked. This can take months or years to fix and sometimes never gets fixed properly. The first sign of identity theft is usually a change to your credit report, often a credit inquiry prompted by the thief trying to open an account in your name. If you subscribe to a credit monitoring service, you will be notified of any change to your credit report within 24 hours of the change and should be able to catch any suspicious activity before it results in fraudulent activity in your name.

Credit monitoring services track your credit file daily and alert you whenever there is a change. These services are great for making sure you stay on top of your credit and are even better for preventing identity theft. Since any new information on your credit report can affect your credit score and your ability to get credit, we highly recommend monitoring your credit for any changes or inaccuracies. Given the high cost of having negative information on your report, we think credit monitoring is a great idea. Correcting incorrect negative information on your credit report can significantly raise your credit score and literally save you thousands of dollars a year.

We think credit monitoring is even more important for preventing identity theft. Most identity thieves will attempt to open new accounts in your name. This will always result in a "hard inquiry" to at least one of the credit bureaus. Credit monitoring services alert you within 24 hours of any change to your credit report, including credit inquiries. Thus if an identity thief is attempting to open an account in your name, you would see an inquiry or perhaps several inquiries from lenders you are not requesting credit from. You can then follow up with the lender or with your credit monitoring service to stop the identity theft before any damage is done.

We highly recommend you get "three bureau" credit monitoring. "Three bureau" refers to the three credit bureaus: Equifax, Experian and TransUnion. It is important to be monitoring all three bureaus, and not just one, since changes to your credit report often happen at only one bureau. For example, a potential identity theft may apply for a credit card using your information. If that credit card issuer requests your credit report (a "hard inquiry") from the Equifax credit bureau, but you are only monitoring your TransUnion credit report, then you will never know. If you are going to go through the trouble and expense to get a credit monitoring service, we think it is silly to try to save a few dollars to get a solution that is incomplete and may not work. We believe you need a service that monitors all three credit bureaus so you can be sure to stop identity theft before it happens. We think it is also critical to monitor all three bureaus from a general credit management perspective. If erroneous negative information, such as a late payment, gets reported to Experian but you are only monitoring Equifax, you will not know that your credit has just been harmed and will not know you need to correct it.

Credit bureaus record a "hard inquiry" in your credit file any time a third party, such as a lender, credit card company or landlord, request your credit report in order to grant you credit. These hard inquiries are typically only made when you are requesting credit. If you have too many of these hard inquiries in a short period of time, it can negatively affect your credit score. Hard inquiries remain on your credit report for two years. A "soft inquiry" is when a lender requests your credit report for marketing purposes when you are not requesting credit, such as to offer you a preapproved credit offer. Soft inquiries do not affect your credit score and do not show up on credit reports given to third parties, although some bureaus will include them for informational purposes only on your own credit report that they provide to you.

We highly recommend it for most people but it depends on your situation. If you are only concerned about identity theft, then there is no real reason to monitor your credit score. However, if you have any interest in being granted credit (such as by getting a mortgage or car loan or getting a new credit card), we think it is very important to monitor your credit score because it affects what type of credit you can get and how much interest you will have to pay. Needless to say, if you are considering getting a mortgage or refinancing a mortgage any time in the next year, we believe it is absolutely essential to montitor your credit score. Your credit report gives you the raw information that you can and should verify, but your credit score translates that information into a rating that potential lenders will use to evaluate you. Monitoring your credit score lets you see whether actions you are taking to improve your credit are actually working. If your credit score is too low and you want to get a mortgage or apply for any other type of loan, you may want to take action to improve your credit, then wait until your score rises before applying for credit.

Yes. You can get 1 free credit report per year from each of the three credit bureaus at www.annualcreditreport.com. While getting one report from each bureau once a year is nice, we don't believe it is all that useful. Negative information getting posted to your report or identity theft can happen at any time and you will suffer the consequences unless you are notified and can act immediately. There is no way to get your credit score for free.

You will need to submit a dispute request to each of the credit bureaus that list inaccurate information on your credit report. In many cases you can do this online. Click on the bureau below to be linked to more information on their credit report dispute process:
Experian
Equifax
TransUnion

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