By Megan Doyle | American Express Credit Intel Freelance Contributor
6 Min Read | November 06, 2019 in Credit Score
In today’s Web-cookied, location-based digital era, it’s not uncommon for the websites and apps you use to track nearly every move. But did you know there’s also a group of credit reporting agencies likewise tracking your financial payment history? The credit reports they generate are detailed, objective accounts of your credit situation and financial history—separate from, but used to help calculate, the simplified numerical representation of financial reliability known as your credit score.
And it may not matter whether or not you’ve ever had a credit card. If you’ve ever taken out a loan or simply paid a utility bill, chances are one of the three major credit reporting agencies (Experian, TransUnion, and Equifax) are keeping tabs on your “creditworthiness.”
Your credit report and credit score are objective measures of your financial reliability, and therefore can carry a lot of weight in a number of circumstances. Depending on the current status of your credit accounts and the history of your bill and loan payments, you might think of your credit report as a trusty companion—or perhaps a looming shadow.
If lenders deem you creditworthy, your credit report might help you get approved for a new credit card with great perks, and even help you land a job or a new apartment.
But if your financial history is rocky, the credit or loan application process might seem daunting. Understanding what’s in your credit report and how it translates into your credit score can help you know what to expect.
The Consumer Financial Protection Bureau (CFPB) notes that each credit bureau creates a slightly different credit report, but most are split into four or five main sections1:
Every 12 months, you’re entitled to a free credit report from each of the three major credit bureaus. According to the U.S. Federal Trade Commission (FTC), annualcreditreport.com is the only website authorized to provide free reports.2 Some experts suggest spreading your three free reports over the course of 12 months to monitor your credit throughout the year.3
It’s worth noting that this source may not provide your credit score. However, many banks and credit card companies offer free access to your credit score. Otherwise, you can purchase your credit score from one of the three major credit reporting bureaus.4
Lenders, businesses, and other entities may look at your credit report and credit score to help decide how financially trustworthy you are. Thus, establishing good credit can help you get approved for loans or a credit cards, earn lower interest rates, get approved for higher lines of credit, and more.
There are two main types of credit inquiries: “hard” and “soft.” Hard inquiries usually occur when you apply for a loan, mortgage, or credit card. But they often come with a price. CFPB points out that hard inquiries can hurt your credit score since most scoring algorithms pay attention to how often you apply for credit.5
Soft inquiries provide a basic overview of your credit history and won’t impact your credit score, according to CFPB. Prescreened credit card or loan offers typically rely on soft inquiries.
And don’t worry, your credit report isn’t openly accessible to anyone. Thanks to the Fair Credit Reporting Act (FCRA), strict laws dictate that only governments and businesses with legally acceptable reasons can request access.6
Whether you see your credit report as a friend or foe, it will always be there to vouch for your reliability when you’re in the market for a house or a new car. But credit reports are used for a variety of other important things, too. Here are some of the less obvious ways your credit report might be used:
A credit report is a detailed account of your credit history that lenders, businesses, and credit card companies use to assess your financial reliability. And because it measures “reliability,” credit reports are also often referenced in a variety of situations beyond getting a credit card or loan, such as renting an apartment or applying for a job.
1 “What is a credit report?,” Consumer Financial Protection Bureau;
2 “Get My Free Credit Report,” U.S. Federal Trade Commission
3 “How do I get a copy of my credit reports?,” Consumer Financial Protection Bureau
4 “Where can I get my credit score?,” Consumer Financial Protection Bureau
5 “What’s a credit inquiry?,” Consumer Financial Protection Bureau
6 “Who may request my credit report?,” Consumer Financial Protection Bureau
7 “Why Employers Check Credit – And What They See,” NerdWallet
8 “How credit affects your car insurance premiums,” Nationwide
9 “Who Can Access Your Credit Report or Score?,” NerdWallet