Annual credit reports are one of those personal finance phrases that get thrown around a lot in casual conversation. You might hear it referenced when talking about credit cards, or buying a home. But what actually compromises a credit report? How does it affect your money? How often should you get a credit report?
Let’s start at the beginning: what is a credit report? A credit report is a compilation of your credit usage and most current credit situation. That means it’s a report that contains how many lines of credit you currently have open, and the payment history you’ve made on past lines of credit.
Lines of credit include things like credit cards, student loans, auto loans, mortgages, or other types of credit. They include bankruptcies, liens, and foreclosures. Reports also have personal information, like your birthday and social security number. Reports are written by credit bureaus. They collect and store financial data about you that they get from banks, credit card companies, and other financial companies.
Your credit report is important to your financial situation because it’s what lenders use to decide if they’ll give you additional lines of credit. When you apply for a new credit card, for example, that company checks your credit report to determine if they want to give you that card, and what your interest rate will be. Your credit report is used to determine your credit score.
Kara Perez is the original founder of From Frugal To Free. She is a money expert, speaker and founder of Bravely Go, a feminist financial education company. Her work has been featured on NPR, Business Insider, Forbes, and Elite Daily.