Financial Learning Center

Understanding Your Credit Report and Establishing Good Credit


In short, your credit report is a detailed story of your financial history. Credit information is gathered from creditors and public records and maintained by the three major credit reporting bureaus – Equifax, TransUnion and Experian. It contains everything from your name, Social Security Number, address and employment status to credit card accounts, mortgages, car loans and student loans, bankruptcies, tax liens and other judgments against you (even criminal convictions) – including current loans and lines of credit. It’ll also show any inquiries made into your credit history. The credit bureaus use the data from your credit report to calculate your credit score.

Your credit report is like a reflection of your financial reputation. Lenders use your credit score and the information in your report to determine eligibility for loans, as well as the terms. Insurance companies may use the information to decide whether you qualify for coverage and to set the rates. More and more employers are using credit reports as a basis of employment. Telephone and utility companies may use the info to decide whether to provide services and landlords may use the information to determine whether to rent you an apartment.

Negative credit information, such as late payments and collections notices, stays on your credit report for seven years. Bankruptcies stay on your report for 10 years. Information regarding lawsuits or unpaid judgments can stay on there for up to seven years or until the statute of limitations runs out, whichever is longer.

Even with a good payment history, your credit is still at risk. With identity theft and credit card fraud on the rise, your credit may be in jeopardy for a very long time before you realize it. In addition to being responsible with your finances, you must now be extra diligent when it comes to monitoring your credit report. By law, you are entitled to a copy of your credit report for free every year. The only officially sanctioned site to receive your free report is annualcreditreport.com.

Your credit affects virtually every aspect of your life. But with responsible spending habits, discipline and a little extra vigilance, establishing, maintaining or even rebuilding good credit can fit into your life with little to no inconvenience.