How to review your credit report - and build credit history

Illustration by Blake Cale

What you need to know:

• Since credit data stays on record for 7 years, it’s important to review your report—here’s what to look for
• Making payments on time is the number one way to build credit history
• Never take out a loan or carry a credit card balance only for the purpose of building credit

How to review your credit report

Periodically reviewing your credit report and checking alternative credit bureau reports is an important first step in financial health. The FACTA (Fair and Accurate Credit Transactions Act) gives you free access to review your credit report once a year. 

You can get one free credit report from each of the big three credit reporting companies every 12 months. Go to AnnualCreditReport.com or call 1-877-322-8228. Some of the credit bureaus will give you more frequent access. You can also get your ChexSystems report at ChexSystems.com and most other alternate bureaus through forms on their websites. 

Once you have your report you will want to verify that all the information is correct. Data stays on your credit report for 7-10 years, so making sure it is correct is very important.

Here are a few terms you should look for: 

Make sure your report is accurate and check for: 

• Incorrect name, address, or phone number 
• Wrong social security number
• Addresses you don’t recognize
• Accounts that you don’t recognize and don’t seem to match credit that you have taken out
• The status of your accounts, for example if an account that you think is closed actually shows as open
• Hard inquiries that you didn’t authorize

You have rights under the Fair Credit Reporting Act (FCRA), which helps ensure the fairness and privacy of the credit bureau information. It allows for you to challenge or dispute the information that is on your credit report.

If you find something wrong, you should reach out to both the credit bureau and the company that provided the information (the creditor). Explain what is incorrect and why, and include supporting documentation when possible.

Disputes can be filed with the credit bureaus either online or via mail, the CFPB has great tools to walk you through this process.

Here are a few more ways to build your credit history: 

• Pay all of your bills on time—consider setting up AutoPay to help do this
• Keeping your accounts open for a long period of time
• Keep your balance, or “utilization”, on your credit cards low: either spend 30% or less of your credit limit, or pay off your balance multiple times a month
• Review your credit report and dispute any errors or inaccurate information
• Rather than opening a large number of credit cards, consider keeping at least one card open for a long period of time
• Use products like secured cards or cards designed for credit building
• Use a mix of products, including installment loans and credit cards

It’s a common misconception that carrying a balance on your credit card improves your score. While low utilization does help, leaving it on your card and incurring interest actually doesn’t. 

What you spend on your card (the balance when the statement is generated or at the end of the month) shows on your credit report whether you pay it off in full or carry it from month to month. Paying your balance in full each month is the best financial decision and won’t hurt your score. 

If you use your credit card heavily during the month, you may want to consider making multiple payments a month, so your balance is always low no matter when credit bureaus check your score.

While having diverse types of credit can improve your credit score, taking a loan that you don’t need isn’t a good financial decision. It is not recommended to borrow when you don’t need to.