Money & Debt

A credit report is a detailed record of how you have borrowed and repaid debts. Most adult Americans have a credit file with each of the three major credit bureaus—Experian, Equifax, and TransUnion.

What is in a credit report?

Your credit report includes personal information such as your Social Security number, birth date, current and former addresses, and past employers. It also tracks key details about your debts, such as:

• The date you opened each account,
• The type of account (e.g., mortgage, credit card, installment),
• Whether the account is open or closed,
• Your monthly payment,
• The maximum credit limit,
• The most recent activity on the account, and
• The current balance and any overdue amounts.
• If an account is delinquent (e.g., 30, 60, or 90 days past due). More serious delinquency can result in reports of repossessions, charge-offs, or collection agency referrals.

Your credit report also shows inquiries, which are records of creditors, employers, or insurers who have requested your report. Hard inquiries, which occur when you apply for credit, can impact your credit score, while soft inquiries (such as when a creditor reviews your account for promotional reasons) do not affect your score.

How is your credit score determined?

Your credit score is a numerical summary of your credit report. The most commonly used scoring system is provided by FICO, which generates a score between 350 and 900 based on several factors:

• Payment history: Whether you make payments on time (35%),
• Debt level: How much debt you owe compared to your credit limits (30%),
• Credit history: The length of your credit history (15%),
• New credit: The number of new accounts you’ve opened (10%),
• Credit mix: The variety of credit types you have (10%).

Impact of non-payment on your credit score

Non-payment of debts affects your credit score, but the damage often happens early on. Once a debt is reported as 30 or 60 days overdue, your score may drop significantly.

If your debt is referred to a collection agency, the agency may report it, which could further lower your score. However, by the time a debt collector contacts you, your score may already reflect the maximum damage. Paying off old debt may not always improve your score, especially if the debt has already been reported. Paying off an account does not mean it will be removed from your credit report.

Special rules for medical debt and other bills

Medical debt is treated differently from other types of debt. Credit bureaus will not report medical debts until they are at least one year old, and starting in March 2023, medical debts under $500 are no longer included in credit reports. These rules may change soon to completely remove medical debt from reports.

Utility companies typically do not report late payments until they declare the bill uncollectible or send it to a debt collector. Similarly, landlords usually do not report overdue rent, but they may send delinquent accounts or back rent to a collection agency, which can then report the account.

Public records and your credit report

Except for bankruptcies, most public records, such as lawsuits and judgments, are no longer reported by the major credit bureaus. However, specialized tenant screening companies may still report eviction records.

If you have negative information on a background check or tenant screening report, you should dispute it.

Negative information generally stays on your credit report for seven years from the first delinquency, while bankruptcies remain for ten years from the date of the bankruptcy filing.

How to obtain a free copy of your credit reports

To review your credit report, request a free copy from each of the three major credit bureaus—Experian, Equifax, and TransUnion—through the centralized service at www.annualcreditreport.com. You are entitled to one free report from each bureau annually. If denied credit, unemployed, or affected by fraud, you may qualify for additional free reports.

You can order your reports by:

• Calling 877-322-8228,
• Mailing a completed request form, or
• Ordering online at the website mentioned above.

Improving and building your credit

Rebuilding your credit takes time and patience. The most important steps are to stabilize your financial situation by maintaining steady employment and managing your debt. Over time, older delinquencies will have less of an impact on your credit score. Avoid seeking new credit solely to improve your score, especially from predatory lenders.

If you choose to apply for new credit, consider secured credit cards or offers with reasonable terms, and ensure that the creditor reports to the major credit bureaus. This way, your efforts to rebuild your credit will be reflected in your credit report.

By carefully managing your debts and focusing on high-priority obligations, you can gradually improve your credit score and restore your financial standing.