Credit Reports 101

What's on Your Credit Report

Your credit report is a window into your financial life. It contains the following pertinent information:

Personal Information

Names and aliases, Social Security Number, addresses, employer names (past and present), and marital status may all appear on your credit report. 

Trade Lines

Your credit card accounts and loans are called trade lines. Each trade line contains detailed information about the account, such as when it was opened, the credit limit and balance, and if you make or miss your payments.   

Public Records and Collection Information

Any liens, bankruptcies, court judgments, or collections appear on your credit report. 

Credit Inquiries

When a lender reviews your credit report, it is known as a credit inquiry. A list of credit inquiries appears on your credit report. No one can perform a credit inquiry on your report without your consent.

Forecasting Your Financial Future

By revealing your credit past, your credit report indicates your financial future. Before extending you loans, lenders review your credit report to see if you’ve repaid your past debts. Lenders like to see that you make timely payments on your existing loans. Chances are, you’ll do the same on new loans. On the other hand, routinely skipping payments makes you a higher risk borrower. Lenders are less likely to extend someone credit who has not honored their past debts.

For example, let’s look at Julia’s credit mistakes. Julia found the perfect graphic design job right after college. It didn’t pay much, but offered some great experience. The only downside was its location; it was in the city, where rents were higher. She wanted to be close to work, though, so she rented an apartment slightly out of her budget. Before long, she was struggling to pay her bills and student loans on time. Her incomes just didn’t support her apartment and other expenses. She missed several credit card and student loan payments in her first year after college. She didn’t realize it at the time, but those missed payments show up on her credit report as negative marks. Now, she’s having trouble securing a good loan for the car she’s trying to buy, and she’s been denied several times for new credit cards. Julia’s credit report shows lenders that she’s not financially stable enough to pay back the money she borrows, and they’re hesitant to extend credit to her.

How Long Negative Items Stay on Your Report

But people like Julia with poor credit shouldn’t despair. As time goes on, derogatory information impacts your score less and less, and eventually falls of of your report altogether. With bankruptcies and collections, however, it could take up to 7-10 years to get a perfectly clean slate.  

Missed credit card and loan payments are likely to remain on your report for 7 years from the time of delinquency, no matter if you pay off the debt and close the account.

Unpaid tax liens stay on your report forever, while paid tax liens drop off after 7 years.   

County court judgments, tax liens, collections, and foreclosures can stay on your report for 7 years.

Bankruptcies stick on your report for 7-10 years. Chapter 7 bankruptcy (wipes clean unsecured debt) and stay on your report for 10 years from the date you file. Chapter 13 bankruptcy (filers agree to repay creditors over 3-5 years) stays on your report for 7 years from date of discharge.  

Credit Bureaus and Lenders

Your credit report is compiled and maintained by the credit bureaus. The three major credit bureaus in the U.S. are Experian, Equifax, and TransUnion.  Credit bureaus act as central repositories for personal data; they compile and maintain millions of credit reports. These bureaus gather information from financial institutions and public records. The financial institutions can be a credit card company, bank, lender, or anyone you receive bills from. They provide information about your accounts to one, two, or all three of the credit bureaus.

Multiple Reports

Because there are three credit bureaus, each of us has three credit reports. These reports may not all contain the same information. For instance, if a lender only reports to Equifax, then your Experian and TransUnion credit reports would not contain that particular account information. It is a good idea to regularly look over all three of your reports.