What is a credit report?
Credit reports end up being the thing you’re judged by when you go to borrow money from a lender. What a credit report does is keep track of the different types of accounts you’ve requested, opened, and the payment history for each of those accounts. It is important that the information in your credit report is a fair and accurate representation of you as a borrower so that you keep yourself eligible for the loans, jobs, apartments, cards, etc. that you apply for.
Credit reports, for the most part, are maintained by three different credit bureaus. Equifax, Experian, and TransUnion are the bureaus that collect information from various creditors, store that data, and then make it available for sale to lenders to help them make informed decisions. The information stored on each of these reports could be, and oftentimes is slightly different. It’s important to understand what is on each of those reports individually, and because of that you’re able to get them each free once per year at annualcreditreport.com.
Credit reports, for the most part, are maintained by three different credit bureaus. Equifax, Experian, and TransUnion are the bureaus that collect information from various creditors, store that data, and then make it available for sale to lenders to help them make informed decisions.
Information in a credit report
Let’s dive into the different types of information that are found in your credit report and hopefully get some understanding of how it can impact your credit score.
1. Personal Identifying Information
Personal Identifying Information (PII) in a report would be things like your name, birthday, address, social security number, and employment information. This information is generally gathered from applications when you apply for credit with a lender. PII isn’t generally used when calculating your credit score and can sometimes be inaccurate.
2. Inquiries
There are two types of inquiries depending on why your credit was pulled. A soft inquiry happens when your credit is pulled without the intent of lending credit. For example if someone pulls your credit for a job, or you pull your own credit report. Sometimes credit card companies pull a credit report to prequalify you for an offer, and that also counts as a soft inquiry. Soft inquiries don’t hurt your credit scores the way a hard inquiry does. A hard inquiry happens when a lender pulls a report to see if they want to issue you credit. If you’re applying for a car, house, apartment, or credit card, the lender will get a copy of your report and that inquiry will be what’s called a “hard pull.” Hard pulls take two years to fall off your report, and can negatively impact your credit score. Generally the scoring systems have logic that don’t ding you for multiple hard pulls for a car or a house in a short time if you’re shopping for a rate, and usually the inquiry only hurts your score for the first year it is on your report. Inquiries on a credit report can also be disputed, and Hatch has a tool to help you dispute inquiries that were made without your explicit permission.
3. Credit Accounts
These are the accounts you probably generally think of being on a credit report. Car loans, credit cards, mortgages, and student loans. Credit accounts fall into one of two categories. Revolving, which is a loan you can borrow from over and over again up to a certain limit, think of your credit cards. The second type is an installment loan, where you borrow a fixed amount and make steady payments over a predetermined set of time in order to settle the loan. This would be something like a car loan. This part of the report will include the name of the creditor, your account number with that lender, any balances, the account status, and the payment history for the account. This is where in a report you’d find the derogatory marks of a 30, 60, 90, or 120 day late payment. Most of the scoring algorithms weigh this part of the report the heaviest. FICO, which is the score that 90% of lenders use, says that payment history makes up 35% of their score. Missing a payment can have a huge impact on your credit score. Hatch works with the three bureaus and your creditors to ensure that any late payment on your report can be substantiated, is accurate, and is fair. If there are late payments on your report, help us understand what was going on at the time and we’ll come up with a plan that works for you.
4. Collections
When an account goes unpaid, a creditor can send that account to collections. In addition to credit accounts, you might find an unpaid bill in this section of your report. This can include bills from doctors, retail stores, cell phone companies, cable providers, and more. Collections accounts may also show as charged-off meaning that the creditor has given up on collecting the debt. An account in collections can remain on your report even after it has been paid in full. Accounts that show in this part of a report can remain on your report for up to 7 years and are generally very detrimental to your credit score. Hatch has seen a lot of success in handling these types of accounts, including working closely with creditors to ensure that the debt is valid and owed by you and asking hard questions about their legal right to collect and record these types of debts. If you have an account in collections, let us help you get your voice heard by the bureaus and your creditor. Even if the collections account is accurate we can help make sure it’s fair and justifiable.
5. Public Records
This part of the report had a recent change. Previously judgements would be included in the public records, but now only bankruptcies show up on the credit report. There are two types of bankruptcies, chapter 13 which generally falls off a report after seven years, and chapter 7 which generally stays on a report for 10 years. Bankruptcies can obviously have a huge impact on your score, but it doesn’t have to be the end of your credit journey. Not only has Hatch seen success in getting bankruptcies removed from reports prior to the 7 or 10 year thresholds, but we’ve also built successful strategies to help rebuild your credit after filing for bankruptcy. If you’re wondering how to handle such a tradeline on your report, please don’t hesitate to see how we can help.
Conclusion
Credit reports contain lots of information from many different sources, and the hodgepodge of all that data can often result in errors. This is why it’s so common to see our competitors harp on that one message ‘there might be errors on your credit report, we can help.’ It’s important to understand that your rights as a consumer and borrower extend beyond just accuracy. Creditors passing on your information to the bureaus, and the bureaus selling that information back to lenders means lots of your information is being spread around without your oversight. If that’s how these institutions want to make their money, they need to be ready to answer the questions we have about the validity and fairness of what they’re saying. Hatch wants to help you have a voice in that discussion. If your score or report is being impacted by one of these negative accounts, please join our little family so we can show you how helpful we can be.