What Your Credit Reports Won't Tell You

A credit report is a pretty simple concept: It’s a report on your past use of credit and loans. That part is generally pretty easy for people to grasp. It’s some of the other stuff on the report — and the stuff that’s not on the report — that confuses some and leads to misunderstanding the credit report’s purpose.

As a consumer, it’s important for you to review your credit reports regularly, because inaccuracies can seriously harm your credit standing. You’re entitled to a free annual credit report from each of the three major credit reporting agencies — Equifax, Experian and TransUnion — and you can improve your ability to manage your credit by reviewing your reports and learning from the information they contain.

At the same time, credit reports are limited sets of data. Here are four things you will not learn from your credit report (but don’t worry, you can get this information in other ways).

Reasons for Inquiries

There’s a section of your credit report listing the instances when people or companies requested your credit report, also known as inquiries. Soft inquiries, sometimes called account review inquiries, may happen without your knowledge, but they also don’t impact your credit standing.

It may come as a surprise to see a list of companies that reviewed your credit, and the inquiry is often not accompanied by an explanation. A common reason for a company to make a soft inquiry is to decide whether or not to extend you an offer (think of all those credit card mailings you receive), and you’re not affected by inquiries for marketing purposes. You should know when and why there’s a hard inquiry on your account, because you have presumably decided to apply for credit, and a credit check is part of the deal.

How to Improve

If you know what you’re looking for, it can be pretty easy to figure out what areas of your credit history need attention, but a credit report isn’t going to spell it out for you. Sure, you can add up all your credit limits and credit card balances, do some math and figure out your credit utilization rate. You can also calculate the average age of your accounts and determine if you need to do a better job making loan payments on time.

You can also learn those things without all the legwork. For example, a free Credit.com account allows you to review your credit standing and the factors most helpful or damaging to your credit. You can also easily make a three-step plan to improve your credit over the course of six months.

If You Qualify

It’s crucial to review your credit report before you apply for something like a home or auto loan, because you don’t want credit report errors to derail your financing plans. At the same time, your credit report simply isn’t going to tell you what interest rates you’ll qualify for, or anything like that. The good news is you can shop around for mortgage and auto loans within a short period of time with little impact to your credit score (the same does not apply to personal loans or credit cards), and your credit score will help you figure out where you stand, in terms of creditworthiness.

Credit Scores

You’re not going to find your credit score on your credit report. They’re two different things, though they’re intertwined. You may see an option for purchasing a credit score when you request your credit report, but keep in mind that there is no “best” credit score. There are hundreds of scoring models, and you never know which one your potential lenders will use to aid their decision-making.

With a free Credit.com account, you can see two of your credit scores, and you can track how they fluctuate from month to month. Comparing the same score over time will give you a great idea of how your credit standing is changing, which makes it an excellent tool for those who want to improve.