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Understanding Your Credit Report

You can think of a credit report as your personal financial report card. A credit report includes information on where you live, how often bills are paid, and whether there have been any legal actions such as arrests or bankruptcy filings in your past. It tells potential creditors how likely you are to pay your bills on time.

Understanding Credit Score

If your credit report is the report card, your credit score is your grade. 

A credit score is a number based on your credit history and “creditworthiness” — a determination of how likely you are to pay back money you owe.  The number is calculated through a formula developed by consumer credit reporting firms. It provides information to creditors, insurers, and employers to evaluate your application for credit insurance, employment or a mortgage. Your credit score is not included in your credit report but can be purchased from credit bureaus. Credit scores can range from 200 to 850.

It is important to review your credit report regularly to catch and fix any errors quickly. Understanding your credit score is helpful in anticipating how much interest you might pay for a loan or how it could affect your application for a job.

Getting your credit report is easy and free.

You can request a copy of your credit report once a year free of charge from each of the three major credit bureaus — Equifax, Experian, and TransUnion. Many people opt to request one report every four months from each bureau to monitor their credit over the course of the year. is the only website where you can request a free credit report. Don’t be misled by other advertisements that claim to offer free reports but actually charge a fee.

Be sure to fix problems on your report.

If there are errors in your credit report, contact the credit reporting company immediately. You should provide information to correct the disputed items, along with your name and address. The reporting company typically must investigate within 30 days.

You should also check for any fraudulent activity on your report as a result of your identity being stolen. If you find accounts have been fraudulently opened in your name:

  • File a police report and notify the Federal Trade Commission to report the identity theft.
  • Close the fraudulent accounts and contact your credit card companies to reissue new cards if any legitimate accounts have been compromised.
  • Place a fraud alert with each of the three credit reporting agencies and freeze on your credit report with the credit bureaus. Credit freezes are free and an initial fraud alert is free for one year.  

There are many ways to improve your credit score.

  • Pay your bills on time — late payments can lower your credit score.
  • Limit the number of new accounts you open — opening new accounts does not necessarily improve your credit score.
  • Length of credit history — keep accounts you’ve held the longest open and active, and use each one at least every 6 months.
  • Pay down debt and keep balances low. Part of your credit score is based on the amount of outstanding debt.
  • Check your credit report by requesting your free credit report and report any errors.

You can also find help in fixing your credit if you are overwhelmed.

If your debt becomes overwhelming, there are many resources to help. In Minnesota, the Department of Commerce regulates two types of firms offering credit repair services: credit service organizations and debt management companies. These firms must offer you a contract describing their fees and services, and they must register with the Department of Commerce. Before signing a contract with any firm, always check to see that it is licensed by using the License Lookup tool on the Commerce website.

Check to see if the firm is a member of a major association, such as the National Foundation for Credit Counseling or the Financial Counseling Association of America. Members of these associations are nonprofit agencies with certified financial counselors that meet certain quality and ethical standards.

Choose a credit repair firm carefully.

  • Avoid offers of a quick debt reduction or debt settlement plan with high upfront fees.
  • Be aware that some fraudulent agencies will get away with using a nonprofit status just to collect your money. Legitimate agencies should be willing to sit down with you and discuss your spending habits and help you come up with a budget.
  • Unrealistic promises, such as erasing your debt for pennies on the dollar in a short time, or promising to reverse a bad credit score, should be red flags.
  • Work with a Minnesota licensee that has a local office with staff available to answer your questions.
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