What Your Credit Report Shows: A Guide for California Home Buyers

In a previous blog post, we talked about credit scores and how they can affect California home buyers when applying for a mortgage loan. Today, we’ll examine credit reports and the types of information they contain. These two subjects go hand-in-hand, since the reports are used to generate the scores.

Your reports are created and sold by three different companies: TransUnion, Equifax and Experian. These are separate companies that do not share data. So don’t be surprised if your three bureau reports look slightly different from one another.

While the data may vary from one bureau to the next, the type of information found within the report is generally the same across the board. We’ll dig into those details in a moment.

How Credit Reports Affect California Home Buyers

Your credit report mostly includes information relating to the borrowing and repayment of debt. As a consumer, you can take on debt in several ways. Mortgage loans, car loans, credit cards, and retail charge accounts are common examples. These things are all included within your credit reports.

But it goes beyond the accounts themselves. The manner in which you repay those accounts can also be found within your reports. This is what influences your credit score the most.

For instance, a pattern of late payments on debt accounts can damage your overall score, making it harder to qualify for a mortgage loan. A pattern of timely payments, on the other hand, could actually boost your credit score.

These scores come into play when you apply for a mortgage loan in California. Generally speaking, a higher score could make it easier to get approved for a loan, while a lower score could have the opposite effect. But it all starts with the items contained within your credit reports. So let’s talk about that next.

Types of Information Found in Your Reports

Depending on the bureau, there are usually five or six types of information within a consumer credit report:

1. The first section is consumer information. This will include your name, current address, previous address, current employer and similar information. Check this for accuracy, and make changes if needed.
2. The next section will include consumer statements. These are comments you might have made in the past when correcting or disputing an item found within your credit report. For instance, if you disputed a late payment that a creditor reported erroneously, your comments would show up in the “consumer statement” section.
3. The negative items or adverse actions section deserves your attention as well. This is where you’ll find information that could negatively affect your credit score, including late payments. Most of these items can stay on your credit report for up to seven years, after which they have to be removed. Bankruptcies can stay for up to 10 years.
4. The next part of your credit report is account information. This might also be labeled as “credit items” or “credit summary,” depending on the company that provided it. Here you will find a list of credit accounts you currently have open, as well as those you have used in the past. Examples include revolving credit accounts (cards), mortgage loans, car loans, and other installment loans. Each account will also have a status assigned to it. The status is typically listed as either “open” or “closed.” You might also find information regarding late payments in this section.
5. There is also a section of your credit report that lists public records. In this context, we are talking about legal judgments of a financial nature that have been made against you. This can include civil actions, bankruptcies, and state or federal tax liens.
6. The inquiries section is usually the last section of your credit report, but this can vary depending on the provider. These are credit inquiries that have been made in your name. For instance, if you try to buy a car and the dealer “runs your credit,” it will show up as an inquiry.

If you’re planning to buy a home in California, and you need to use a mortgage loan to make that happen, you might want to review your credit reports for accuracy. All three of the credit-reporting companies have a “disputes” section of their websites, for this very purpose.

What’s Not Included

Federal laws prevent the inclusion of certain types of information within a consumer’s credit report. Here are some of the things you won’t find in your report:

• Information about your savings or checking accounts, such as current balance
• Income-related information
• Bankruptcy filings that are more than ten years old *
• Debt collections or charged-off accounts more than seven years old **
• Information pertaining to your religion, gender, ethnicity, political affiliation, or criminal record

* Chapter 7 and Chapter 13 bankruptcies can be included in your credit report. But federal laws require that they be removed after ten years. If you find a bankruptcy on one or more of your reports that is more than ten years old, you can probably dispute it.

** Debt collections and charge-offs can be included, but they must be removed at the seven-year mark. You can dispute any of these items that are more than seven years old.

If you would like to learn more about this subject, you can refer to the Fair Credit Reporting Act (FCRA) on the Federal Trade Commission (FTC) website. This law regulates what the reporting bureaus can and cannot do, with regard to consumer information.