If you don't have immediate plans to borrow money, finance a purchase or apply for a credit card, you might think you don’t need to worry about your credit score or your credit report. However, most of us ultimately use credit in one form or another, and knowing what goes into your report can help you put your best foot forward so you’re in good financial shape when you do apply for a loan or credit card.

Large Purchases

Taking out an auto loan or home mortgage will impact your credit report for years to come. Your bank will report how much you still owe on the loan every month, as well as whether you make your payments on time. As long as you consistently make on-time payments, the impact on your credit report is often a positive one.  

Credit Card Transactions

Credit card companies typically don't report each purchase you make—instead, they tend to report how much you've charged overall and whether you've been making on-time minimum payments to the account. Applying for a new credit card (on which you can take advantage of a balance transfer offer) will require a hard inquiry and may remain on your report for up to two years. 

Home Equity Lines of Credit

Your credit report will show your Home Equity Line of Credit (HELOC) credit limit, similar to a credit card account—but your credit score will treat the HELOC more like an installment loan because your score doesn't consider how much of your available credit you're using.  

Installment Loans

When you make bigger purchases like an engagement ring, it’s common to pay for it over a period of time via financing. Repayment terms can be from a few months to years. Your credit report will show the purchase as an installment loan, and each month it’ll show whether you made your payment or not. On-time payments can help your credit report. 

Utilities and Other Services 

Expenses like utilities, medical bills or your cell phone account typically don't show up on your credit report—but if you fall behind on your payments and the accounts are turned over to collections, they may be reported.

When it comes time to take advantage of your credit, a good credit report can ensure you access to the best rates and terms and help you save money in the long run. By learning what a credit report consists of and what kinds of purchases affect it, you can take better control of your report as you work to improve it for the future. Learn more about understanding your credit report and managing your personal finances.