Chances are that you are well aware that your credit report is important, and that it is the basis for your credit score. However, there are some things that many consumers aren’t aware of when it comes to their credit reports.
Understanding your credit report, and how it works, is an important part of managing your credit and your finances. If you don’t know how something works, you are less able to use it to your advantage. Additionally, what you don’t know might hurt you in the long run. Here are 3 things you should know about your credit report:
1. Creditors Decide What Information They Will Report
With traditional credit reporting, the credit industry is in charge of the information that appears on your credit report. Creditors decide what they will report, and where they will report it. There is no required consistency in what is reported. Some creditors report information on your account every month (credit card issuers regularly report information on a monthly basis, which is one reason they are so important to your credit score), while others only report every few months.
Creditors can also decide which information they will report. In some cases, creditors may not report a late payment if you make it within a few days of the due date. On the other hand, some creditors report a payment as late if it comes only a day after the due date. It’s entirely up to the creditors to decide what they will report, and how often they will report it. As a result, it’s important to be aware of this fact, and realize that you can’t “make” them report anything.
It’s true that if you can show that some information is inaccurate you can force the creditor to change the information, but as long as the information is correct, creditors can report it as they see fit.
2. Your Credit Reports Don’t Always Have the Same Information
We often think of a “credit report” as this monolithic history that contains everything. However, there are multiple credit reports. There are reports issued by the “big three” credit bureaus — Experian, Equifax, and TransUnion — and there are even other reports issued by smaller bureaus. Different credit reports might have different information in them. You can’t expect all reports to be identical.
In fact, a creditor doesn’t have to report to all three major bureaus if it doesn’t want to. A creditor may just report to one of the bureaus, and that means that the other two bureaus may not show the information, or that it might take longer for the information to appear in those records.
Whatever the case, it’s not uncommon for your three major credit reports to be different from each other. While much of the information is likely to be the same, the differences can mean rejection or acceptance, depending on what is used. Also, if there are mistakes in one report, but not in another, it can mean less favorable loan terms if a creditor looks at the report containing the errors, and doesn’t pull the more accurate report.
Many major lenders for big purchases like homes will look at all three reports side by side as part of the process, and identify problem areas, and may even ask for clarification. It helps to understand that not all reports are the same, and that you should be prepared for that reality.
3. Lenders Aren’t the Only Ones with Access to Your Report
Different versions of your credit report might be used for different purposes. The information on your credit report, even at a single bureau, might be presented to different people in various ways. For example, if you are applying for a job and your potential employer wants to look at your credit as part of the background check, a version of your credit report might be used that is different to what a lender might see. Insurers in some states might also be able to take a look at your credit report, and some landlords want a peek at your report as well.
Just because you aren’t borrowing money doesn’t mean that someone with whom you are doing business won’t ask if they can look at your credit report, and you should be aware of that.
Once you understand these realities of your credit report, you will be better able to make financial decisions.