What is a Credit Report and What's on it?

Credit reports can appear overwhelming. They’re often loaded with all kinds of information, from dollar amounts and company names to strange abbreviations and unfamiliar terms.

Despite how they look, credit reports play a key role in securing any big purchase like a car or a mortgage. That’s why it’s important to spend a little time learning about how they work, what they include, and what they don’t.

Basically, credit reports describe your history as a borrower and include details such as payment history, current balances and unpaid debts. Think of it as a report card for your credit.

It’s important to recognize that only certain types of accounts are monitored by credit reporting agencies, including credit cards; installment loans repaid at a fixed amount over a predetermined period of time, such as auto loans, student loans or mortgages; and retail accounts such as store credit cards.

How to Read a Credit Report

Understanding your credit report can be overwhelming at times. While there is some variation in how credit reports are organized, all three bureaus should provide information about your personal information, credit accounts, public records and inquiries.

Personal Information

This section includes information to identify you:

• Full name and any nicknames used with a credit account
• Current and previous addresses
• Date of birth
• Social Security number
• Phone numbers
• Current and past employment information

Credit Accounts

This section includes information about your borrowing and repayment history:

• Type of credit account
• Name of lender
• Credit limit or loan amount
• Account balance
• Payment history
• When the account opened and closed

Public Records

This section may list financial information reported through public records, which could negatively impact your report. Common examples include:

• Foreclosures and bankruptcies
• Civil suits and court judgments
• Tax liens
• Child support arrears

Inquiries

This section tracks any requests for your credit report or a credit score and remains on your credit report for up to two years. There are two types of inquiries:

• Hard inquiries: Occur when a lender checks your credit report after you apply for credit, like a loan or credit card. It can slightly lower your credit score for a short period and is visible to other lenders.
• Soft inquiries: Happen when your credit is reviewed without you applying for new credit, such as pre-approved offers or account reviews by existing lenders. It doesn’t impact your credit score and is only visible to you.

For more information about hard inquiries and soft inquiries, check out some important credit considerations.

Credit Monitoring

Keeping a careful eye on your credit report is crucial. Errors and faulty information can find their way onto anyone’s credit report, and those mistakes could knock you out of contention for a VA loan. The best way to monitor your credit is by periodically reviewing your credit report.

A host of credit monitoring tools and websites offer a look at your credit score. But many of them require you to purchase credit monitoring or hand over other personal information. You can avoid that hassle and obtain completely free copies of your reports thanks to federal legislation.

Under the Fair Credit Reporting Act, every U.S. citizen can obtain a free credit report from each of the three major credit reporting bureaus (Equifax, Experian and TransUnion) once a year. To obtain a free copy of your credit report, visit AnnualCreditReport.com. There are a couple of different approaches to consider.

You may order your reports from each of the three nationwide credit reporting companies at the same time, or you can order your report from each of the companies one at a time. The law allows you to order one free copy of your report from each nationwide credit reporting company every 12 months.

That’s why some consumers prefer to space out their requests and order a free report from one credit bureau every four months, which provides a window into your credit throughout the calendar year.

Accounts that typically don’t appear on your credit report include cable, telephone and utility bills. Note that while these companies don’t report “regular activity” to credit reporting agencies, they could report an unpaid bill or a payment that is late by 30 days or more.

How to Fix Credit Report Errors

About 1 in 4 credit reports contain errors serious enough to result in denial of credit like a home loan, according to data from U.S. Public Interest Research Groups.

Here's a quick look at three basic steps to combat credit report issues:

Step 1: Dispute the error with the credit bureau

Obtain your credit report from all three credit bureaus. Send a letter to any bureau that is reporting the error. That could be either one or all three of the credit reporting bureaus (Experian, Equifax or TransUnion). Credit scoring firm FICO has a good sample dispute letter on their website.

Step 2: Inform the creditor of the error in writing

You’ll also want to contact the appropriate creditor. This could be the credit card company, retailer or lien holder who is reporting the error to the credit bureau. You can typically send the same letter and documentation to both the credit bureau and the specific creditor.

Step 3: Check back often

Credit bureaus are required to investigate errors within a short period of time, usually 30 days. Creditors can take a bit longer to respond, but generally reply within 30 to 90 days. If you fail to get a response, check back in writing and follow up with a phone call.

That’s just a handful of the ways you can work to improve your credit score. There are so many other things you can do, and many of them will really depend on your specific situation.

Although VA loans are known for their flexible credit requirements, having a higher credit score is advantageous. It instills confidence in lenders by showing the applicant's debt management skills and timely payment habits. Lenders use these reports to evaluate the borrower’s financial standing and the associated lending risk. A positive report can lead to favorable loan terms, such as lower interest rates.

Veterans United Credit Report Requirements

Generally, we require all borrowers to have a tri-merge credit report with a minimum of 1 FICO score. The credit report must be dated within 120 days of the note date, 180 days for new construction loans. Any credit report with masked or suppressed information is not acceptable.