How to Read A Credit Report
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You may have ordered your credit report because you were:
• Denied credit
• Checking for errors
• Yearly checkup
• Planning on making a large purchase
• Evaluating your score
Now that you have your report, can you actually figure out what all the terms mean or what all the numbers stand for?
Credit-reporting agencies
In the United States there are three main credit-reporting agencies. Since the reporting of credit information is voluntary your mortgage company may report to all three agencies. Whereas your car loan provider may report to one and your credit card to two of the three different agencies. For this reason it is wise to look at all three reports. You are entitled to a free credit report from each agency a year. You must request this report. Your free yearly report is not automatically sent.
Identifying information
This is the information that identifies you. You will want to look at it closely. It is not unusual for there to be two or three spellings of your name, minor variations of your social security number and/or of your date of birth. The credit bureau will tell you that the inconsistencies (inaccuracies) don’t matter. That is a point you will want to decide for yourself. It may matter to you how numerous names, addresses and social security numbers are perceived by perspective creditors or employers. Remember this is your electronic and financial reputation.
Credit history
This is the section that lists each credit account reported to them. Trade line is another term used for individual accounts. Each trade line will list the:
- Creditor
- Account number
- Date account opened
- Type of account (installment or revolving)
- Total amount of loan
- High credit limit or highest balance
- Current balance
- Status (open, closed, paid, delinquent, or charge off)
- Monthly payment
- Ownership (jointly or in your name only)
- Payment history
Each agency has a different way of listing how well you have paid your account.
One agency reports your payment history using numbers 1-9 with one being good; another states payment status as never pays late, typically late 30 days and so forth.
Public records
This section you always want to be totally blank. If there is anything in this section it is not good news. It will not list arrest, but it does list financial problems like, liens, judgments and bankruptcies. Anything in this section will destroy your credit score.
Credit Report Inquiries
Inquiries section is the area that lists everyone that has asked to see your credit report. There are two forms of inquiries, soft inquires and hard inquiries. These two are quite different. Soft inquiries are from companies wanting to send you a pre-approval promotion or it can be from a current creditor who is monitoring your account. Hard inquires are ones that you initiate with a credit application. These can have a negative impact on your score. This can impact you if you are on the cut off for better rates or credit approval. There is a 30-day period for mortgage and car loan inquires where they will not be counted. Also if you have more than one in a 14-day period they will all count only as one.
Credit Report Errors
It is estimated that 80 percent of all credit report have errors in them and that more than 25 percent of those are serious enough that credit may be denied and/or higher interest rates applied.
Next Step: Credit Score Personal Information
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