Credit

How To Read A Credit Report

Your credit report is a report with all your financial history with loans, credit cards, and all other debt you have. Most people only think of credit reports when working with lenders who are assessing credit risk. However, you can pull your own credit report to check it out for accuracy and get an idea of your creditworthiness. But if you haven’t read a credit report before, it may be a little challenging to navigate. Below is more information on how to read a credit report and more details on the significance of your credit reports. 

How Can I Get a Credit Report?

There are three credit reports you can pull, one from each of the three major credit bureaus. It is a good idea to make sure you get a copy from each bureau to check for accuracy. 

Due to the fair credit reporting act, you are entitled to one free credit report from each major credit reporting agency once a year. You can pull these free credit reports at once. The three major credit bureaus for American consumers are: 

  • Equifax
  • Transunion 
  • Experian 

Once you get a copy of all of your credit reports, you can go over them. Below is how you can read your credit report from beginning to end to get the most information. 

How To Read a Credit Report?

Your credit report may look slightly different depending on which bureau’s report you are looking at, but each will have five sections. Here are the five sections and what information they have:

Credit History

Your credit history will take up the most space on your credit report is one of the most critical parts of it. Factors like payment history, credit utilization, age of accounts, etc., are all included in the algorithm used to calculate your credit score. And this credit score and factors are precisely what lenders look at for a deep dive when you apply for credit. The different parts of credit history on your reports include:

Payment History and Status

Your payment history has the most considerable impact on your credit scores (35%). Whether you make on-time payments or miss payments, these transactions will show up on your payment history. Missing payments constantly in a short amount of time can substantially negatively impact your credit. In contrast, making timely payments will help you quite a bit. Past due amounts, on-time payments, and late monthly payments may not show up right away but will be there eventually.

Current, Closed, and Transferred Accounts and Lenders

Your current, closed, and transferred accounts will include any credit accounts on which you are or were an authorized user. These accounts will include any joint loans or credit cards. Examples of accounts include mortgages, personal loans, auto loans, installment loans, and loans with no credit check. Your accounts and their statuses, along with the lender’s name, will be a part of the credit history part of your report. Any open, closed, and transferred accounts will remain on your credit report for up to ten years. 

Account Balances and Limits

All of your current revolving accounts and standard loan balances will be under the credit history section of your credit report. As you pay off or increase balances, they will be reflected and updated accordingly on your credit report. 

Account Dates

Although how old or new your credit account may not seem like something that could be important, it is! Mature credit accounts can help you establish a solid credit history and is something that lenders pay attention to and will be a part of your credit report.

Any negative information like missed payments, accounts sent to collections, etc., will remain on your credit report for up to seven years. 

Because credit history is the most significant part of your credit report, it is also the place that will likely have errors, if there are any. A few examples of common mistakes include:

  • The same debt listed more than once, under the same name or something else. 
  • The wrong status of a credit account. For example, an open account stated as closed, etc. 
  • Payments listed as late, even if you made them on time. 
  • Accounts incorrectly reported — incorrect dates for account opening, closing, payments, unfamiliar accounts, wrong current balance, or anything else. 
  • Accounts that are listed that you know you are not an authorized user. 

Your Personal Information

The first thing that you may notice will be your personal information. This information will be your name, social security number, current and previous addresses, date of birth, and an email address. It is always a good idea to review this information, even if it may seem straightforward. Make sure everything is accurate, including spelling, dates, and numbers. Common mistakes include mixing up one person with another and incorrect identity information such as an incorrect social security number.

Employment History

Your employment history or employer history will list your current and previous employers. This information will help lenders determine the type of income coming in each month and whether it is reliable. For example, if you have only had a job for a few months, you may qualify for a small loan. However, for something like a mortgage, you may need to have a job for more extended periods. When reading this area of your credit report, make sure the employers listed match your actual history and that things like dates are correct.

Public Records

Public records for any debt will show up on your credit report, and there will be a section on it. This information will include things like bankruptcies, foreclosures, and repossessions. It should not have any tax liens or other tax-related information. These kinds of records will stay on your credit report for up to ten years. 

Credit Inquiries

A lender can conduct two credit inquiries: soft inquiries will not impact your credit scores or show up on your credit reports, while hard inquiries will. Every time a financial institution runs a hard credit inquiry, it will appear on your credit reports. Your credit inquiry section is another spot where you can spot potential identity theft issues. The first step for thieves with your information is to inquire about loans and credit cards that involve hard inquiries. And so, make sure this information is accurate for financial protection. 

Why Is It Important To Read a Credit Report?

It is imperative to check your credit reports regularly and know how to read them. Scanning and reading your credit report is essential because credit reports will directly impact your credit scores. By checking your credit reports frequently, you can ensure that all the information listed is accurate. Sometimes lenders will make mistakes and send the wrong information to the credit bureaus. In other cases, the only sign you may get of potential identity theft is through your credit report. For example, suppose someone has your personal information and takes out a loan or credit card. In that case, the only early way you may find out about these accounts is by checking your credit report. 

In addition to potential mistakes and identity theft, checking your credit report can help you find the best strategies to improve your credit score. Not only that, but it can help you get a big picture view of your financial health. From here, you can set financial goals, adjust a budget, or more. Being able to read a credit report is an essential part of financial literacy. It can help you make informed decisions about the type of loans and credit cards you may want to take out in the future. 

How To Fix Errors on a Credit Score?

Fixing errors on your credit report can be done by contacting the credit bureau or bureaus that have that mistake recorded on your credit report. You can email, mail, or call these businesses and file a dispute. A dispute can take anywhere from 35 to 40 days for an answer. When submitting a dispute, you should be ready with: 

  • Your full name
  • Social Security Number
  • Date of birth
  • Current address
  • Your preferred email address 
  • A copy of a government-issued ID (a passport, driver’s license, state ID card, Military ID, etc.)
  • All addresses where you have lived during the past two years

Most disputes will have documents proving the information that is being disputed. What you attach to your dispute with the credit bureaus will depend on the type of error you are trying to fix. Here are some examples:

  • An FTC Identity Theft Report.
  • Letters from creditors with up-to-date credit information. 
  • Court documents.
  • Bankruptcy schedules.

Need more help with disputes and credit report issues, check out our complete guide on fixing errors on your credit report.

The Bottom Line With Reading Your Credit Report

Reading and understanding each part of your credit report is an essential part of financial literacy. Your credit reports are broken down into several parts, each playing a vital role in determining your credit scores and financial health. It is essential to regularly check your credit reports from all three credit bureaus to search for inconsistencies and errors so you can fix them. And so you can protect yourself! 

References: 

Filing a dispute – Annual Credit Report.com.

What are common credit report errors that I should look for on my credit report? | Consumer Financial Protection Bureau

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