Credit Report Basics: What You Should Know

Did you ever wish for a crystal ball to see your future? Well, you already have one: your credit score is a predictor of your financial future because it controls how likely you are to be able to buy a home or car, get a credit card, or rent property, and in some cases, it may even be considered when you apply for a job. Your credit report, the information that’s used to calculate your credit score, is also an early warning system for identity theft.

Unfortunately, only 33 percent of Americans currently check their credit reports even once a year. That needs to change, because checking your credit report is one of the best ways to protect yourself against identity theft and to have a quick recovery if your identity is stolen. Here are the things you need to know about your credit report, how to review it, and how to use it to protect yourself against identity theft.

What is a credit report? A credit report contains your financial history: credit cards, loans, etc., and information about how promptly you make your payments. It gives your total available credit, and how much of that you’re currently using. It can also show any judgments against you, liens, and accounts that went into collections. All of this gets boiled down into a personal credit score, somewhere between 300 and 850, that predicts how likely you are to pay back loans or credit card balances on time.

Who can see your credit report? A credit reporting company can send your credit report to businesses where you apply for a credit card, government authorities, landlords, employers or others who they believe have a legitimate reason to use the report. (You have to give written permission for a current or potential employer or landlord to be able to access your report.) They can also supply your report in response to court orders or subpoenas, or to any party upon written instructions from you.

How to request your credit report. By federal law, you are entitled to a free copy of your credit report once a year from each of the three major credit bureaus, Equifax, Experian, and TransUnion. (Due to the COVID-19 pandemic, the three bureaus are offering free weekly online reports through April 2021.) You can request and view your credit reports from all three bureaus online or request paper copies at annualcreditreport.com. If you’re an IDX Identity member, you can get access to credit reports through your member dashboard. You can also learn more about your free reports and your rights at the Federal Trade Commission’s website and the Consumer Financial Protection Bureau’s website.

So, what should you look for when you review your credit report? In a nutshell, you are looking for anything that’s incorrect or suspicious.

Signs of trouble could include:

• Unexpected changes or errors in personal information such as your name, address, phone number, birthdate, Social Security number, or employment history
• Unrecognized credit cards and mortgage or other loans, including home equity loans (HELOCs)
• Accounts incorrectly marked as closed, open, or past due or with incorrect balances
• Unknown accounts such as phone, electricity, water, cellular, or streaming entertainment
• Unexpected requests for your credit report from unauthorized sources
• Unexpected changes in public records, including court judgements, liens against your property, or bankruptcy

How can you protect your identity and privacy using your credit report? Unfortunately, it is possible that a criminal could pretend to be a legitimate business or landlord and get access to your credit report, which would give them information about your financial accounts.

You have several options to control who accesses your credit report:

• The Fair Credit Reporting Act allows credit card companies and insurers to see limited information on your credit report before they decide, for example, to send you a credit card offer. You can opt-out of this pre-screening, which should also reduce all those junk credit card offers in the mail.
• If you think someone has stolen your identity and is using it to get loans or credit cards or rent property, you can put a freeze or lock on your credit report to prevent lenders and other businesses from accessing your report. Neither of these will affect your credit score or prevent you from getting cards or loans, but you will need to remove them temporarily if you are applying for new credit or loans. A credit freeze is free, but setting up or removing one can be challenging, as seen here. A credit lock is easier to set up and remove than a credit freeze, but a lock currently costs almost $20/month with TransUnion or Experian. (The IDX Identity Premier plan includes a free credit lock.)

What if you find problems on your credit report? If you see incorrect information, it doesn’t necessarily mean that you’re a victim of identity theft. For example, people make data entry errors, so you might see a variation of your name that’s misspelled, and the credit bureaus all have processes to challenge incorrect information.

On the other hand, unknown credit cards, debts, or other financial judgements need to be dealt with promptly. If you identify an error on your credit report, the FTC recommends that you start by disputing that information with the credit bureau. Some information can be disputed online, but most will require you to explain in writing what you think is wrong, why, and include copies of documents that support your dispute.

But if you think your identity has been stolen, there will be more work to do. If you’re an IDX Identity member, contact IDX immediately for help. Our expert recovery team will work with businesses, credit bureaus, medical providers or insurers, law enforcement, government agencies, and any other organizations that need to be involved in shutting down fraudulent activities and getting your identity back to pre-theft condition.

No one knows you better than yourself, so you need to be the first line of defense for your identity. Your credit report and credit score are powerful tools if you use them. Fortunately, once you learn to read your reports and get in the habit of checking them regularly, it’s not difficult or time-consuming. It’s too bad the majority of American’s don’t yet use these tools regularly, but today is a great time for you to join the smart minority that does.