Credit Reports: What You Need To Know


The concept of credit can be complicated. People sometimes confuse the words debt and credit because they both have to do with borrowing money.

A simplified way to tell them apart is to think of credit as the ability to borrow money and repay it later, while debt is the money you already owe or have to repay.

What is a Credit Report?

A credit report is a “warehouse” of financial data on individuals with data released to those who have a legitimate reason to see it.

Your credit report contains information gathered from credit cards, lenders, banks, collection agencies, and other creditors. Including tax liens and bankruptcy courts.

You are allowed to view your credit report free annually, one from each of the three credit bureaus: Trans Union, Equifax, and Experian. You can order your free reports at or call 1-877-322-8228 to have them delivered by U.S. mail.

How your Credit Report is used

  • Lending decisions (for example: being approved for a car, house, credit cards, and most types of loans)
  • Applying for utilities and cell phone service
  • Applying for insurance
  • Applying for an apartment
  • Applying for employment in asset-related jobs like a loan officer

Hard Inquiries vs. Soft Inquiries on your credit report

Lenders make ‘hard inquiries’ when you apply for credit. These inquiries may affect your credit score. This is because most credit scoring models look at how recently and frequently you apply for credit. The more inquiries you have (especially in a 60-day period) the higher credit risk you are. Creditors don’t know which applications were approved or for how much money.

‘Soft inquiries’ are reviews of your credit file when you have not sought to establish a new credit account. They may include reviews of existing accounts by lenders, pre-screening inquiries by prospective lenders, inquiries from a landlord, and your requests for your annual credit report. These inquiries do not affect your credit score.

Credit History

Your credit history is a record of your ability to repay loans and other bills on time. You want a positive credit history to boost your credit score. To ensure your history is positive, make sure you pay bills on time and don’t miss payments. You should also take the time to review your reports each year for any errors.

Negative Credit History

Negative credit history could include items like:

  • Late payments (Payment history is 35 percent of your score!)
  • Bankruptcy
  • Back child support
  • Collections
  • Charge-offs
  • Excessive inquiries

Did you know credit card accounts and their balance to limit ratios weigh heavier than paying your car or house mortgage? To help mitigate this, try to pay your credit cards off completely each month. This also helps to avoid compound interest.

How long do things stay on your credit report?

  • Positive information can stay on your credit report forever.
  • On-time payments can stay on your credit report forever.
  • Late payments can stay on your credit report for up to seven years.
  • Bankruptcy can stay on your credit report for up to 10 years.

When you should get your report more than once a year:

  • If you are unemployed and plan to look for work in the next 60 days
  • If you receive public assistance
  • If you believe your credit report is wrong because of fraud

If you are a victim of fraud, you are entitled to get additional free credit reports during the year.

Credit Utilization

Experts advise keeping your credit use to no more than 30 percent of your total credit limit on revolving credit accounts like credit cards. For example, if you have a credit limit of $10,000 on your credit card, you should have a balance of no more than $3,000 at any given time—preferably less.

Keeping a low credit utilization rate will help your credit score stay high. Credit scoring formulas penalize you for using too much credit.

In short, unless borrowing to buy a home or a car, do your best to only spend the money you have. Remember, the amount of time you spend managing your money is just as important as the time you spend making it.

If you need help increasing your credit score or with debt management, call Chestnut Credit Counseling Services (CCCS) at 800.615.3022. CCCS helps individuals and families by analyzing personal finances and assisting with financial planning, money management, and planned debt repayment. CCCS is not-for-profit and is affiliated with the National Foundation for Credit Counseling (NFCC).

About the Author

Author Brian Irwin
Title Credit Counseling Coordinator

Brian Irwin is the Credit Counseling Coordinator at Chestnut Credit Counseling Services. He started working as a credit counselor in December of 2018 and completed his National Foundation for Credit Counselors certification in January 2019. Brian has a total of 26 years in the financial industry starting as a mortgage collector and moving into bankruptcies, foreclosures, and progressed into mortgage underwriting to 11 years as a Consumer Loan Officer/Credit Analyst with a CCUFC, Certified Credit Union Financial Counselor certification. After spending more than two decades in the financial industry, Brian knows what truly drives conversions about financial wellness and how to connect with the heartbeat of people wanting to educate themselves about financial wellness. Brian’s leisure time is spent with his family either riding motorcycles, hiking, or fishing at his favorite fishing hole in north-central Minnesota.