Credit & Finance

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30 June, 2017
3 Minutes
What is a Credit Report and Why is it Important?

Alison Grace Johansen

Contributing writer

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Regularly reviewing a credit report should be at the top of the list of your personal financial habits. A credit report can act as a shining light into your financial background, helping reveal personal payment history and lending and credit worthiness. It can even serve as a sentinel against identity theft and consumer fraud.

Why you should check your credit report

Surprisingly, a high number of Americans don’t read their own credit reports.

A 2016 survey by the Consumer Federation of America and VantageScore reports that 32 percent of Americans have never obtained a copy of their free credit report. As a result, they may be putting their financial health at risk. Not reading your credit report can cost you money, lead to loan and credit denials, and give fraudsters a head start on stealing your identity.

There’s more. If you don’t check your credit report, you might miss a downtick in your credit score, which can lead to higher interest rates on loans and credit, and may even result in the loss of a job offer from employers who review credit reports when they vet employment candidates.

The good news. Credit reports are very accessible and even free to obtain. In fact, you can access free annual credit reports at More on this, later.

To gain the multiple benefits of regularly reviewing a credit report, you have to read and understand them. Not only that, it helps to know how to leverage the information included in your credit reports to make your personal financial experience stronger, more stable, and—by using report information to boost your credit score—more lucrative, too.

Credit reports and scores

A credit report is a list of your present and past credit accounts and loans, as reported by businesses and financial institutions with whom you’ve done business. Those businesses may report your credit and loan history, including your payment history, to one or more of the three major credit reporting companies—Equifax, Experian and TransUnion.

“A credit report is a history of everything you are doing with your credit now and what you have done with it in the past,” says Katie Ross, education and development manager at American Consumer Credit Counseling, a national financial education nonprofit located in Auburndale, Massachusetts. “A credit score mathematically represents the information in your credit report. Your credit report and score affect your ability to get credit and the terms/rates of that credit.”

It’s important to note that your credit report and your credit score are not the same thing, and your credit report doesn’t include a credit score. (A credit score is really just a formula that turns the data in your credit report into a three-digit number.) There are lots of different credit scoring models. And even though federal law allows you to request a copy of your credit report every year—from each of the three major credit reporting agencies—the law doesn’t require those companies to provide you a free annual credit score.

Checking credit reports

What’s in a credit report? According to the Federal Trade Commission, a credit report is a summary of your credit history and includes: identifying information, such as your name and Social Security number; your credit cards; your loans; how much money you owe; and whether you pay your bills on time or late.

Not all of a consumer’s personal credit history is included on a credit report. Ross says that on-time phone/utility bills, debit card use, paying with cash, writing checks, checks cashed, and remittances aren’t included on a credit report.

Lenders use credit reports to help determine the lending rates they provide consumers. Think of a credit card company using your payment history to set high (or low) interest rates on a card, or a mortgage lender running the sale risk calculations for the purchase of a new home, Ross says. “Therefore, managing positive credit history is important to consumers,” she points out.

How important? Take, for example, a 30-year, fixed-rate mortgage loan of $250,000, with an interest rate of 5 percent. Under that scenario, the total cost of the mortgage would land at $483,139, for a monthly payment of $1,342.00.

But an interest rate of 3.5 percent would result in a total mortgage cost of $404,140—approximately $79,000 less expensive than the loan with the 5 percent rate. Plus, with a monthly mortgage payment of $1,123 at the three percent interest rate level, the homeowner would save $219 per month against the loan with 5 percent mortgage interest—cash savings that could be used to buy groceries, pay household bills, invest into a retirement plan, or be steered into a college savings plan.

Tips to improve credit history

To earn those savings, here are some steps you can take to improve and maintain a positive credit history:

  • Pay bills consistently and on time
  • Maintain reasonable amounts of unused credit
  • Apply for credit only when needed, keeping credit inquiries to a minimum
  • Check credit reports annually, disputing any errors that hurt your report

How you can request your 3 credit reports

A consumer can request his or her credit report anytime. “Enacted in 1971 to protect U.S. consumers, the Fair and Accurate Credit Transaction Act entitles individuals to one free credit report each year from each of the three main credit bureaus,” Ross says.

Additionally, consumers can access their credit reports by:

  • Visiting the website:
  • Calling toll-free at: 877-322-8228
  • Sending a written request to:

    Annual Credit Report Request Service
    P.O. Box 105281
    Atlanta, GA 30348-5281

“You can also get your credit report for free from Credit Karma or potentially through your credit card company (many offer cardholders free reports),” says Brandon Yahn, founder of Student Loans Guy, a college financing web site. “Identity management services…also offer access and monitoring of your credit report.”

Ross recommends that consumers check each of their three credit reports once a year to ensure the information is accurate. “They don’t have to be requested all at once,” she says. “A consumer can stagger their requests from each credit reporting agency every four months to constantly monitor the information.”

Additionally, if a prospective employer checks your credit report as part of the hiring process, they are also required to provide you with a copy.

The main credit report agencies

There are three main credit reporting agencies operating in the U.S.—Equifax, Experian, and TransUnion. Below, you’ll find a link to each credit reporting agency, along with basic information drawn from their respective websites.


With its headquarters in Atlanta, Equifax operates or has investments in 24 countries in North America, Central and South America, Europe and the Asia Pacific region. Equifax employs approximately 9,500 employees worldwide and organizes, assimilates and analyzes data on more than 820 million consumers and more than 91 million businesses worldwide. Its database includes employee data contributed from more than 7,100 employers. The company’s common stock is traded on the New York Stock Exchange under the symbol EFX.


Experian’s corporate headquarters is in Dublin, Ireland, and the company operates across 37 countries with 17,000 employees. Experian maintains credit information on approximately 220 million U.S. consumers and 25 million active U.S. businesses. The company also maintains demographic information on some 235 million consumers in 117 million living units across the U.S. Experian is listed on the London Stock Exchange under the symbol EXPN.


TransUnion’s headquarters is located in Chicago, and the company employs 4,700 people in 30 countries across North America, Africa, Latin America, and Asia. TransUnion has a global customer base of more than 65,000 businesses and has data representing more than 1 billion consumers globally drawing from 90,000 data sources.

The Fair Credit Reporting Act states that consumers have the right to know what information is in their credit report and to correct any errors. “This legislation was designed to promote accuracy and ensure privacy of consumer information in credit reports,” says Ross.

Disputing a credit report

To correct an error on a credit report, take direct action by contacting the particular credit agency that has incorrect information. The agency usually has 30 days to investigate the information, and the information must be removed from a file if the credit reporting agency cannot verify a mistake or correct the errors.

The FTC offers a sample dispute letter to help you with this process. You’ll find the sample here.

Something to keep in mind if you’re house-hunting while disputing a credit reporting mistake. “Many mortgage lenders will not allow you to get a loan with an active credit report dispute,” says Todd Huettner, president of Huettner Capital, a Denver-based real estate lending firm.

The bottom line on credit reports

The primary takeaway for credit report consumers? Know that lenders and creditors use credit reports to determine a person's ability to repay a debt.

“Credit reports show your history of making on-time payments and the risk you present in taking on debt,” Yahn explains. “Having a high credit score allows you to get a lower interest rate on loans and allows you to be approved for lucrative rewards credit cards.”

Conversely, a credit report with lots of problem means you’ll likely have a low credit score, and that can mean high interest rates and it can restrict your ability to buy certain products—especially if you can't get a loan.

“A person should be especially vigilant with their credit report when they are preparing to apply for a financial product,” Yahn adds. “Remember, the higher your credit score, the lower interest rate you may receive. Reducing your interest rate by even 0.1 percent will save thousands of dollars over the life of a loan. This same principle also applies to auto loans, student loans, or credit cards.”

As Yahn points out, knowing the ins and outs of credit reports is a big first step in making sure your score is in good shape. “Understanding your credit report enables you to improve your credit score, and that allows you to save a lot of money,” he says.

In that sense, knowing and understanding your credit report is no luxury—it’s a necessity.

Editorial Disclosure:
This article is designed to educate readers. That means that while LifeLock, which sells identity theft protection services, produced the article, the point is NOT to encourage you to buy LifeLock's products. The point is to inform and educate so that you are empowered to make sound decisions, whether you buy from us, a competitor, or not at all.

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Editorial note: Our articles provide educational information for you. NortonLifeLock offerings may not cover or protect against every type of crime, fraud, or threat we write about. Our goal is to increase awareness about cyber safety. Please review complete Terms during enrollment or setup. Remember that no one can prevent all identity theft or cybercrime, and that LifeLock does not monitor all transactions at all businesses.

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