How To Read Your Credit Report

How To Read Your Credit Report
Andy Ballentine and 1st-Netcard.com.

Once you've received a copy of your credit report, you'll need to know how to read it. The first thing you'll notice is a bunch of confusing numbers, terms and abbreviations.

Examples of these are - Trade lines, account review inquiries and charge-offs, etc. So where do you begin to make sense of it all?

We suggest you begin by requesting a copy of your credit report from each of the three major credit reporting agencies in the USA, and analyze them as outlined below.

The Big 3 credit reference agencies are - Experian, TransUnion and Equifax. Due to changes in the Law, once every 12 months you can print a copy of your credit report held by each of the credit reporting agencies by going to: www.annualcreditreport.com.

Don't forget, this is a free service and in accordance with the law, once a year you are entitled to read a copy of your credit report online from each of the major credit bureau at www.annualcreditreport.com. Visit the following link to learn more about this free service and how to get your free annual credit report.

Understand, obtaining a copy of your credit report does not tell you your credit score. This important service provides access only to your credit file. Importantly, however, this information is used by creditors in deciding whether or not to extend credit to consumers. And this is why it's so important you obtain this information. So be diligent. Get your free credit report once every year.

Remember too, it's of little value to read only one copy of your credit report from only one agency. The best thing by far is to read copies of your report from each of the three agencies. The reason for this is because each agency may hold different information about you. So now you know!

What to look for in your credit report:

A credit report consists of four sections:

Identifying Information
Credit History
Public Records
Inquiries

IDENTIFYING INFORMATION:
Identifying information is information that identifies you. Examine this carefully and ensure it's accuracy. For example, look for differences in your Social Security number. This can happen through human error; usually because someone (not you necessarily) reported it that way.

Other information held in your credit report will include:

Your current and previous addresses
Date of Birth
Telephone numbers
Driver's License numbers
Your employer
Your spouse's name

CREDIT HISTORY:
(Special note: Sometimes individual accounts are referred to as trade lines.)

Each account will include the name of any creditors with related account numbers, although, sometimes you may find these are scrambled for security reasons. You may, of course, have more than one account with a creditor.

Creditors, too, have more than one kind of account. For example, if you move elsewhere in the country, the creditor may transfer your account to another office, and assign a new account number. This entry also includes:

The date you opened the account:

The kind of credit extended (whether instalment, such as a mortgage or car loan. Or revolving credit (credit associated with a department store credit card

Whether the account is in your name or held jointly with another person, such as your partner

Total amount borrowed, (high) credit limit or highest balance on the card

How much outstanding is still owed

Fixed monthly payments or minimum monthly amount

Status of the account (whether open, inactive, closed, paid, etc.)

How you've conducted the account:
On your Experian report, your payment history is written in plain English -- "pays on time", "always pays 30 days late", etc. Other comments may include "internal collection" (collections department) and "charged-off" or "in Default.

("Charged-off" means the creditor has given up on collecting the account and subsequently, written off the debt.)

Other credit agency reports instead use Payment Codes denoting activity on the account. These range 1 to 9; R1 or I1 on a credit report is indicative of a good repayment history on a revolving or instalment account.

PUBLIC RECORDS:

Hopefully, the next section of your credit report will be blank. The public records section is, without doubt, bad news. If you have a public record, this indicates previous problems.

The kinds of things we're talking about here are major financial delinquencies such as bankruptcies, judgments and tax liens. These problems will ruin your credit report for sure.

INQUIRIES:

The final section is for Inquiries. This section contains a list of every creditor who has asked to see your credit report.

The thing to note about "inquiries" is that every time a creditor asks to see your credit report, this will show up as an inquiry.

From all this activity, you can begin to see why your credit file is so detailed.

Inquiries are divided into two sections:

"Hard" inquiries - are those initiated whenever you fill out credit application.

"Soft" inquiries - are those initiated by companies who pre-qualify you before sending promotional material.

You may have heard rumours that large numbers of inquiries have a negative impact on your credit score. In fact, this is not as damning as many would have you believe.

In reality, the vast majority of inquiries are ignored by the FICO (sounds like "psycho") scoring model.

This is because the FICO model has a lead-in period that ignores all inquiries within 30 days of a mortgage or car loan approval. It also counts two or more "hard" inquiries in the same 14-day period as just one inquiry.

For example, you could have 20 "hard" inquiries in two weeks and they will only count as one.

If you find any mistakes in your credit report such as an account belonging to someone else, or a disputed amount, then you should fill out the dispute form that comes with the report. Simply follow the instructions in the Explanatory Notes section.

The process of Disputing an item on your report can take some time as creditors have 30 days to respond to the discrepancy by the credit reporting agency. And unfortunately, as long there remains any dispute, that dispute will also show on your credit report. Established lenders state that it's common for most reports to have errors. Some estimate that as many as 80 percent of all credit reports have some kind of error.

See also: How To Fix Your Credit Report.

Credit Repair Guides Free to Fix Bad Credit Scores. This website is designed to help you find the best information about credit and credit related issues in the United States. Download our free Credit How-tos now! Copyright © 2005 Andy Ballentine and 1st-Netcard.com. All Rights Reserved. Please note: This Resource Box MUST be included with article.