Apply for a mortgage loan, an apartment, an auto loan or a credit card, and your bank or landlord will likely contact the credit bureaus to assess your creditworthiness. Credit is important in the financial world. Without a credit history, it’s challenging to acquire financing for many big ticketed items. Creditors, landlords and employees can learn your credit habits by reviewing your credit history, and the three credit agencies — Equifax, Experian and TransUnion — maintain a record of your credit history.
Credit bureaus are organizations that keep a detailed record of your credit history. Any credit account opened in your name is likely reported to the bureaus. This includes accounts that you cosigned, and accounts where you were listed as an authorized user.
There are three main bureaus and each bureau has its own credit report. When applying for credit, housing or a loan, it’s customary for creditors to pull your credit report. They can learn the length of your credit history, as well as your current standing with existing creditors. Your credit report provides clues about your credit habits, and this information helps creditors decide whether to extend a new line of credit or a loan.
Mortgage lenders, auto lenders and other creditors report to the credit bureaus on a monthly basis. Since the information on your credit report helps other creditors determine whether you’re creditworthy, regular updates are imperative. The information your existing creditors give the bureaus include your current account balance and payment history.
Updating Equifax, Experian and TransUnion with your account balance is important because this allows other creditors to assess your debt ratio in relation to your income. And if you have any 30-day (or more) late payments, this information is also included on your credit report.
Credit bureaus also receive information related to serious credit mishaps, such as a bankruptcy, judgment, collection account, repossession and foreclosure. What’s more, credit reports include previous addresses, as well as known aliases.
Because the information reported to the credit bureaus plays a major role in whether you’re approved for financing, the accuracy of information is important. For this reason, every consumer should review his credit report from each of the three credit agencies at least once a year.
Inaccurate information can include an unfamiliar account, late payments reported in error, inaccurate/higher account balances, and the erroneous reporting of negative information like a collection account. Errors may seem minor on the surface. But it only takes one error to drive down your credit score. Losing even a few points can make the difference between an approval and a denial. Plus, lower scores result in higher interest rates. Thus, it’s important to stay on top of your credit report and contact the credit bureaus to correct errors.
There are multiple ways to contact the credit bureaus and access your personal credit file. You can visit Annualcreditreport.com and request a free report from each of the three credit agencies. Equifax, Experian and TransUnion give consumers one free copy a year. You can also visit each bureau’s website and request a report.
While credit inquiries are reported to the credit bureaus and reduce your credit score, checking your own credit report does not harm your credit. Thus, you can check your own credit report as often as you like.