If you have any type of credit, such as a car payment or credit card, you should understand what a credit report is and how to read it yourself. You ought to know who can pull your report and how the information is used. When you understand your credit score, you can take steps to improve it.

Who Has a Credit Report?

You have a credit report. Almost immediately after graduating from high school (and sometimes before graduation,) young consumers are sent applications for credit cards. Whether heading to college or straight into the workforce, twenty-year-olds often make their first down payments for cars and enter into rental agreements. School loans, payday loans, and other types of debt begin to add up. Eventually, just about everyone ends up with a long credit history, and that history is detailed in a report that creditors, employers, apartment managers, and many others can look up.

What Is a Credit Report?

This document is packed with a lot of personal information and is often shared with people. Some of this happens without you even being aware. The information shared on the report includes

• The amount of debt you owe
• How your debt is distributed
• Where you live
• Where you work
• Your credit limits
• Original loan amounts and how long you’ve been paying
• Your history of making payments, including the occurrence of late and partial payments
• Bankruptcy proceedings
• Any lawsuits and/or judgments filed against you
• Foreclosures and repossessions

Inquiries, or requests to see your credit history, are also listed in the reports. In fact, there’s so much information packed into the report that it could be more than 100 pages. All of the information gathered into this report is used to calculate a score, and most credit scores fall somewhere between 300 and 850. The higher your score, the better your credit history looks.

How Is the Information Gathered?

Credit reporting agencies, sometimes called credit bureaus, are organizations that collect credit information from banks and creditors, companies you do business with regularly, utility companies, and other sources, including public records. Some businesses provide information to the credit bureaus on a monthly, but some are less consistent about updating facts. All of the information is put into a report that creditors use to determine whether you are a good credit risk or, in other words, whether they believe you’ll pay back a loan.

There are three commonly recognized credit bureaus in the United States: TransUnion, Equifax, and Experian. There are also some much smaller, but specialized agencies with specific purposes. Most of the time, you and your creditors will work with one of the three major credit reporting agencies. These agencies sell credit reports to lenders who want to know whether you’re a good risk. Employers and landlords can also get access to this report but usually require your written permission to gain access. A great report may help you get a better job, and a low credit score could prevent you from getting into an apartment.

Why Should You Read Your Own Credit Report?

It’s important that you review your credit report at least once a year and more frequently if you find errors or if you believe you may have been the victim of identity theft. The version of the report that you obtain includes everything the lenders see as well as a list of who else has looked at your report.

1. Prepare To Take Out New Loans

It can be an unpleasant experience to sit down with a lender only to discover that you have a very low credit score. Instead of waiting to be surprised, get a copy of your report, so you can comfortably talk about your high amount of debt or a series of late payments. Of course, if you pull your report and find cause for concern, you may want to hold off on getting another loan.

If you have a great credit score and your annual credit report shows evidence of that, you may qualify for credit card perks or rewards that wouldn’t be available to others. For example, you may qualify for cashback rewards or really low interest rates.

2. Recognize Identity Theft

Identity theft is a big concern for consumers today. One of the ways to recognize criminal activities is to check your report for misspellings of your name, address, or employers. Sometimes these mistakes are simply blunders on the part of the organization who reported the information, but it’s best to follow up any time you find errors or discrepancies in your report.

3. Make Improvements to Your Credit Score

If you’re working to improve your credit score, you may look up your report more often than once a year. There are several things you can do bring that number up:

• Make payments on time every month.
• Pay off as many loans as you can to reduce your credit utilization ratio and don’t take out any additional loans. Basically, reduce how much you owe as much as possible.
• Leave records of old debts on the report. Don’t close out accounts that have been fully paid. Those positive accounts bring your score up.
• Some credit agencies offer programs to help you improve your score. Take advantage of those expert resources.
• Review your report for any mistakes or incorrect information.
• When possible, provide explanations for any reported information that doesn’t give a clear explanation of late payments or a credit blunder.

Even if you have a great credit score, checking your report is a good idea, so you can catch mistakes that might lead to a low score. The more familiar you are with your report and score, the better able you’ll be to make corrections and catch identity theft early.

When’s the Last Time You Read Your Report?

If you haven’t read through your credit report lately, make some space in your calendar for the task this week. You may find that you’re happy with the way things look, and you can file the report away with your other financial paperwork. You might find that there’s suspicious activity that you need to address before things get worse. Either way, reading and understanding your credit report is an important element of your annual financial maintenance.