Lafayette Federal Credit Union
Vice President, Business Development
In order to fully understand credit, it’s essential to first understand the importance of credit reports. In the United States, there are three major credit bureaus: TransUnion®Opens in New Window, Experian®Opens in New Window, and Equifax®Opens in New Window. Each one produces credit reports, which essentially contains detailed information about your credit history and your overall financial picture, including but not limited to:
The first part of your credit report details your personal information, including your full name (as well as any former names or aliases), your date of birth, and your Social Security number. Your report may also include contact information such as your current and previous addresses, your phone number, and your email address.
It’s important that your personal information is listed accurately. If any of the information is incorrect, you should immediately file a report with the credit bureau.
Additionally, your credit reports may list your current and previous employment history. Although your employment history has no impact on your creditworthiness or credit score, it’s included on your credit report to verify your identity. As with personal information, it’s equally important to report any mistakes or information you don’t recognize.
Finally, the bulk of your credit report is made up of your credit history. This section includes information about your current and closed credit accounts, payment history, current balances, credit limits and loan amounts, the names of your creditors and lenders, and your account statuses.
In addition to the names of your creditors and lenders, the credit history section of the report will also detail:
Current and Closed Credit Accounts
This section includes any current and closed credit accounts (of all types) under your name from the past seven to ten years. These accounts include individual accounts, joint accounts, or any accounts where you’ve been listed as an authorized user.(Tip: The longer you have open accounts in good standing, the better your credit history looks to potential lenders.)
This section lists all of your loan and/or service payments and whether or not they were made on time. If you’ve ever made a late payment to a credit card or even a utility company, your credit report may indicate so and will also show the number of days past due. The more late payments you have, the more it will negatively impact your credit report.
(Tip: Automate your debt and utility payments through your bank or credit union so you never miss a payment!)
Amount of Debt You Owe
Creditors send regular reports to the credit bureaus for each of the borrowers they service. Therefore, the amount of debt you owe will likely be updated on your credit report every month. Depending on when your creditors send this information, this section will show the amount of debt you currently owe on each account, as well as the highest-ever balances on those accounts.
(Tip: Paying off your balance before the due date may prevent your creditors from reporting that you owe any debt.)
Account Opening and/or Closing Dates
The length of your credit history is an important factor of your overall creditworthiness. The longer you’ve demonstrated your responsibility to lenders, the better your credit history will be. As proof of this, your credit reports contain the dates you opened accounts, closed accounts, and/or paid off installment loans in full.
(Tip: Even if you no longer use a particular credit card, keeping that account open may actually improve your credit (the longevity of the account is the benefit here).
Your status for each of your accounts may be listed as open, closed, paid, refinanced, transferred, or foreclosed. Additionally, accounts may be listed as "charged off”, which means that your payment is so late the creditor has considered your account delinquent (as it is unlikely to be repaid).
(Tip: If you have any "charged off” accounts, you may still be able to pay off your debt and have your account status changed on your credit report.)
For each category on your credit report, review every detail carefully and look for any mistakes or information you don’t recognize; if you find anything, immediately report the information to the credit bureaus. Here are some errors to keep an eye out for:
Because creditors might not report to all three credit bureaus, it’s ok if there are minor differences between reports (as long as the information is still accurate). Significant discrepancies, however, may be an indicator of identity theft. If you notice any major differences between reports – especially if there’s activity you don’t recognize – contact the credit bureaus to get assistance with correcting the misinformation.
Just like you have multiple credit reports, you also have multiple credit scores. This is because there are several credit scoring companies that lenders and others use to check your credit or verify your identity. Two of the most popular credit-scoring companies in the US are FICO®Opens in New Window and VantageScore®Opens in New Window.
Credit scores are calculated from the information on your credit reports. Not all the information is weighted the same, however. For example, FICO calculates your credit score based on the following weighted categories:
When you’re first beginning to build your credit, changes in your credit reports can be extra impactful to your score.
This is why Ricardo’s credit score dropped so dramatically when he made a charge to his new credit card. Because he had no other credit history, his new creditor reporting an $800 balance on a card with a $1,000 limit likely triggered the drop in his score. His score may have also been affected by the new credit inquiry that was initiated before he was approved for the credit card. Once his creditor reports the balance paid in full the following month, Ricardo’s score will likely return to normal. As he continues to use the credit card responsibly and pay off his balance in full each month, he will see his score increase over time.
It’s important to review your credit reports often. Doing so every few months helps you know where you stand, tracks your progress, and catches any mistakes or fraudulent activity.
Before the COVID-19 pandemic, you could access each of your credit reports for free once a year by visiting AnnualCreditReport.comOpens in New Window. You had the ability to obtain a copy of each credit report every four months for free.
Since early 2020, the three credit bureaus have been offering free weekly credit reports for consumers, allowing for more control over monitoring their credit.
Contrary to popular belief, your credit reports do not contain a credit score; these must be requested separately. There are a few different ways you are able to access your credit scores. Some credit card companies offer their consumers access to their free credit score in their app or at the bottom of monthly statements. Similarly, your bank or credit union may also offer access to your credit score in their app, although it varies by institution. Finally, you can obtain your score for a small fee with each of the bureaus or through a credit score service.
Lafayette Federal Credit Union offers tools and resources to support the financial well-being of its members. We work with our members to provide the education they need to succeed - whether it’s for credit building, homebuying, fraud prevention, and more.
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