Why Do Your Credit Reports Matter?

Have you ever pulled your credit reports? If so, there’s a good chance you found them difficult to understand, or maybe you even found errors in them. 

According to the Consumer Financial Protection Bureau (CFPB), which releases a yearly summary of consumer complaints, credit reporting errors are a major problem. In recent years, issues with credit and credit reporting have accounted for 85% of the complaints the CFPB has received. 

What does that mean for you? It means that checking your credit reports, understanding what’s in them, and dealing with any errors you find are more important than ever. If you don’t, you could find yourself in a bind when you want to take out a credit card or a loan, or when you need a new apartment.

What information is in your credit reports?

It’s important to understand what a credit report is and what it isn’t. At its core, a credit report is a track record of your history with debt. Your reports give creditors, landlords, and in some cases employers, a quick way to evaluate how risky you are.

Your credit reports contain the information you’ve included in applications for credit in the past, as well as information about your past debt accounts. When you review your credit reports, you can expect to see the following details:

• Identifying information: Your current and past names, date of birth and SSN.
• Contact information: Your current and past addresses and phone numbers.
• Debt accounts: Details of your loans, credit cards, collection accounts and any bankruptcies, going back as far as 10 years.

How does this information get into your credit reports? It’s provided to the credit bureaus (Experian, Equifax and TransUnion) by the companies you’ve had debt with or where you’ve applied to open an account.

Common credit report myths

Many people have incorrect assumptions about what’s in credit reports. While the following information can impact your finances, it is not included anywhere in your credit reports:

• Income
• Race or ethnicity
• Medical history

Another common misconception is that the credit bureaus are the ones who approve or deny your applications for credit. In reality, it’s up to the creditor to make that decision.

Why should you pull your credit reports?

There are many good reasons to pull your credit reports. The information in your reports, also known as your “credit history,” can have a major impact on your financial well-being. 

Here are some of the main reasons to pull your credit reports on a regular basis:

• Financial opportunities: The information in your reports directly impacts your credit scores and can determine if you qualify for loans, credit cards, apartments and certain jobs. 
• Identity theft: You may find signs of identity theft or credit card fraud that need to be addressed.
• Errors: If you find errors in your reports, you can address them by filing credit disputes for free. 

The Fair Credit Reporting Act (FCRA) gives you the right to dispute incorrect information in your credit reports and have it updated or removed. When you file your dispute, the credit bureau has up to 45 days to investigate and send you their response.

Should you hire a credit repair company to “fix” your credit?

Are you anxious to find a quick-fix for credit problems? When you’re in this position, it’s easy to fall prey to predatory, for-profit “credit repair” businesses that charge high fees but don’t offer legitimate help. 

All these companies do is charge you fees to file disputes on your behalf. What they don’t tell you is that you can file your own disputes for free, and you’re more likely to have a positive result when you file without their help.  

Here are some red flags that indicate a credit repair business is highly predatory: 

• Offering to create a new identity and credit file for you. 
• Guaranteeing they can remove negative information from a report, even if it’s accurate. 
• Asking for upfront payments. 
• Pressuring you to send money without sending you a written contract.

Here’s what the Federal Trade Commission says about credit repair companies: “Don’t believe ads that promise an easy fix. There are ways to fix mistakes on your credit report, but you can’t legally remove information that’s correct and up to date — and no one else can either, no matter what their ads promise.” 

Legitimate resources for improving your credit 

There are easy ways to work on improving your credit, and the best methods are either free or low cost. You can start by pulling your three credit reports from AnnualCreditReport.com. The site is free to use, it’s federally authorized, and pulling your reports doesn’t hurt your credit scores at all.

Do you want help understanding your credit reports or improving your credit scores? The NFCC can help with that part. You can schedule an appointment with one of our nonprofit member agencies today. During your appointment, our certified counselors can review your reports with you, line-by-line, and offer personalized tips for improving your credit history and raising your scores.