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

Close-up of a credit report displaying a score of 746 labeled as 'Excellent', alongside a breakdown of credit score grades ranging from 'Excellent' to 'Poor', with a white calculator and pen on a brown surface.

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.

Credit Report Definition

A credit report is a detailed record of an individual's or entity's credit history and financial behavior. It is compiled by credit reporting agencies and used by lenders, creditors or others to assess the creditworthiness of an individual or business.

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.

How long do late payments stay on credit report?

If you are interested in making any big purchases in the near future, you should try to avoid late payments at all costs. Creditors typically report payments as delinquent after 30 days.

Late payments can stay on your credit record for up to seven years from the original delinquency date and can remain visible on your credit report even after you pay off your overdue bill.

It’s important to understand there are different categories of late payments based on how recent they are, how severe they are and how often they occur.

There are additional late categories for 60, 90, 120 and 150 days, each of which tends to inflict a higher degree of damage to your scores. Once you get beyond 180 days, lenders may “charge off” the debt or send it to a collection agency or both. Any of these may hurt your score and sometimes even keep you from landing a home loan.

What does charge off mean on a credit report?

Creditors “charge off” your bad debt if they determine repayment is unlikely. Writing off the debt as a loss is an accounting move for the creditor. But it doesn’t mean you’re suddenly in the clear. In fact, creditors will often sell the charged-off debt to a collections agency.

Charged-off accounts can also appear on your credit report and hurt your score. Mortgage lenders can take differing approaches to charge-offs. Some lenders may count them toward their cap on “derogatory credit,” while others ignore them altogether in some cases. Make sure to inform your lender beforehand if you’ve had debt charged off in the past.

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.

Why Your Credit Report is Important

Credit reports hold significant value in determining your credit score, which can have a big financial impact on your life and obtaining a home loan. A positive credit history not only accelerates the mortgage approval process but also influences the interest rates and loan amounts offered.

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.

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