As bills, credit cards, and loan payments add up, even the most organized people can forget an overdue bill or forget about an unused credit line. Thankfully, Americans have a free resource to keep all of this info in check.
In the United States, people have the right to receive free, detailed reports summarizing their debt, credit, and loan situations. These free documents are called credit reports, and they can help people identify unpaid debts, fix reporting errors, and report fraudulent credit activity.
What is a Credit Report?
A credit report is a summary of your open credit card accounts, loans and loan payments, overdue debts, and other financial information.
Credit reports include a variety of financial information, including:
- Bill payment history
- Current debts
- Employment location
- Household location
- History of legal suits
- History of arrests
- History of bankruptcy
Note: Credit scores and credit reports are different. Your credit score is a three-digit number that generalizes your ability to manage debt while your credit report is a summary of your recent financial life. Financial companies use your credit report to calculate your credit score, so you typically won’t see your credit score when reviewing your credit report.
How are Credit Reports Used?
Credit reports are used by the big three credit reporting agencies (Equifax, Experian, and TransUnion) to calculate your credit score. Equifax, Experian, and TransUnion then offer your credit information to lenders, rental agents, employers, and other entities who want to gauge your ability to manage debt.
Lenders will use your credit report information to determine whether or not to approve you for a credit card or loan. Lenders will also use this information to determine the details of a loan, setting specifics such as interest rates and credit limits.
Rental agencies and landlords can use your credit report to decide whether to accept or deny your application to rent their property. Employers may use a credit report to approve or deny an employee’s application (especially if that employee works in the financial sector).
Why Should I Check My Credit Report?
You should check your credit report at least once a year to protect yourself from surprise debts, incorrect information, or fraudulent activity.
- Surprise Debts: With medical, loan, and credit card debts all piling on at once, it’s easy to forget about a past payment. Unfortunately, unpaid debts (especially those that are well past their due date) can quickly sink your credit score. If you read your credit report annually, you may be able to find and pay off a debt before it does further damage to your credit score.
- Incorrect Information: The people that complete your transactions, file your loans, and manage your interest are all human, meaning that they occasionally make mistakes. Checking your credit report can help you discover (and remove) any costly mistakes.
- Fraudulent Activity: If someone is using your name to open a new line of credit, your credit report may be the fastest way to catch them in the act. You can save yourself a huge financial headache by catching fraudulent activity early and reporting it to your lenders and credit reporting agencies ASAP.
How to Check Your Credit Report
According to federal law, Equifax, Experian, and TransUnion must each offer a free credit report annually to any individual who makes a request.
To request a free report, go to AnnualCreditReport.com, the homepage that represents the big three credit report agencies. You can request a credit report via their online portal, phone number, or mail.
You Should Check Your Credit Report at Least Once Per Year
We recommend that you check all three of your credit reports annually. The easiest way to do this is to request all three credit reports—one from Equifax, Experian, and TransUnion—at the same time.
With all three credit reports in hand, you can easily compare the reports side-by-side to help you spot any surprises, errors, or fraudulent activity.
What if There are Errors on My Credit Report?
If you find an error or fraudulent activity on your credit report, organize a dispute letter immediately.
The dispute letter should include your name, the incorrect information you wish to dispute, and any evidence you may have to support your dispute (such as a credit card transaction history or a mortgage statement).
Save a copy of your dispute letter and any evidence before mailing it.
After saving, send a copy of the dispute letter to both the credit report agency in question (e.g., Experian, TransUnion, Equifax) and any business or entity that may have mishandled your lending information (e.g., credit card company, mortgage servicer).
Once mailed, create a digital spreadsheet to keep track of any developments with your dispute. Record important information such as the date you mailed your dispute, the date of each response you received, and the date changes were made to your credit report. If you encounter any issues during the dispute process, you can use your spreadsheet to easily reference these important dates and developments.
Clean Up Your Credit Report
If your credit report is full of unpaid, unsecured debts such as medical, credit card, or loan debts, we know some professionals who can help. With a professional debt consolidation company, you can merge your multiple debts into one low monthly payment.
Make debts easier to manage with our list of the best debt consolidation companies out there.