Financial Word of the Day: Credit Report

You probably know you have a credit report. But when was the last time you actually looked at it?

Your credit report is essentially your financial borrowing résumé. It tells lenders where you’ve borrowed money, how much you owe, and—most importantly—how well you’ve handled your obligations.

Understanding your credit report can help you qualify for better financing, catch costly mistakes, and protect yourself from identity theft.

What Is a Credit Report?

A credit report is a detailed record of your credit history compiled by a credit reporting agency.

In the United States, the three major credit bureaus are Equifax, Experian, and TransUnion.

Your credit report typically includes information such as:

• Credit cards and credit limits

• Mortgages

• Auto loans

• Student loans

• Personal loans

• Account balances

• Payment history

• Late or missed payments

• Accounts sent to collections

• Certain public-record information

• Recent credit inquiries

Think of your credit report as the raw financial data behind your creditworthiness.

Credit Report vs. Credit Score

These two terms are related, but they aren't the same thing.

Your credit report is the information.

Your credit score is a number calculated from information in your credit report.

Here's an easy analogy:

Your credit report is the report card.

Your credit score is the GPA.

A lender may review both when deciding whether to loan you money and what interest rate to charge.

Learn more about the importance of credit with Speak the Language of Money

Why Your Credit Report Matters

Suppose you're applying for a mortgage.

The lender reviews your credit history and sees that you've consistently paid your bills on time, kept your credit-card balances manageable, and responsibly handled previous loans.

That history can make you appear to be a lower-risk borrower.

Lower risk can potentially mean better loan terms and lower interest rates.

And lower interest rates can translate into thousands—or even tens of thousands—of dollars saved over your lifetime.

That's why managing credit isn't just about borrowing money. It's about keeping more of your money.

Here's How You Might Use the Term "Credit Report"

Imagine you're preparing to buy a house.

You might say: "Before I apply for a mortgage, I'm going to review my credit report and make sure everything is accurate."

That's financially savvy thinking.

You don't want the first person carefully examining your credit report to be the person deciding whether to loan you $400,000.

Your Smart Money Move

Review your credit reports regularly.

You can obtain free credit reports through the federally authorized AnnualCreditReport.com.

Look for:

• Accounts you don't recognize

• Incorrect balances

• Payments incorrectly reported as late

• Duplicate accounts

• Signs of identity theft

• Old or inaccurate information

If you find an error, don't ignore it. Dispute inaccurate information with the appropriate credit bureau.

Your credit report may not be something you think about every day, but it can affect some of the biggest financial transactions of your life.

The Bottom Line

A credit report is the detailed history of how you've managed borrowed money and credit accounts.

Knowing what's on your report gives you the opportunity to correct errors, strengthen your credit profile, and potentially qualify for better financial opportunities.