How to Read Your Credit Report
Once you’ve received your credit reports you may be a little overwhelmed by the information that you see. These reports can contain a lot of financial jargon and numbers. For some, the first question they have is “okay, what do I do now?”.
Before we discuss the ins and outs of reading your credit reports, it’s important to note that unless you get all three current reports, it’s really difficult to determine what your credit profile really looks like. Having only one credit report and then using that as your only view of your credit history, you’re setting yourself up for possibly being declined by lenders and creditors.
The reason this happens is because all three credit reports are slightly different and the three major credit reporting agencies Experian, Trans Union, and Equifax maintain separate databases — although they do share some of the same information. Another tip to go along with this is that you do not want to rely on someone at a bank to pull your credit reports. You want to get these directly from the agencies that produce them since the information third parties have many be different as well.
How credit reports are structured
There are essentially four distinct sections to a credit report. They include identifying information, information and public records, your credit history, and a list of companies that have viewed your credit report. Let’s talk about each one separately.
Identifying information
This information is exactly what it sounds like, information that identifies you. It is not uncommon for credit reporting agencies to have some of this information wrong on your credit report. Sometimes they will list separate spellings of your name or have multiple social security numbers that are associated with your credit history. This is usually because someone who was responsible for reporting your credit information entered it into their systems incorrectly. Variations are not something you need to be worried about what you should have been cleaned up as a matter of best practices.
Your credit history
Each of your individual accounts, both the one’s you are still using and past accounts, will be listed in your credit history section. This section will also include the names of the creditors who have extended your credit and a partial account number. If you have received multiple accounts from the same creditor the accounts will be listed individually. Sometimes creditors transfer your accounts and while doing so, may change the number.
This part of your credit report will also include information such as:
- What kind of credit you were issued, such as a credit card home loan or car loan
- If this is an individual count or an account with cosigner
- The total amount of credit you were issued in the highest balance you have carried on that line of credit
- The average monthly payment
- Whether or not that account is still open, closed, paid more in active
- Your payment history with the account
Public Records
This section of your credit report you want to be blank. Problems are made part of the public record are usually things that you do not want in your credit report. These are things like tax liens, bankruptcies and judgments against you. If you do find information in this section you need to take steps to immediately to repair it.
Credit inquiries
There are two different types of credit inquiries. The first is what’s known as a hard inquiry which usually occurs after you fill out a credit application. On the other hand, soft inquiries are usually generated from additional information to pre-qualify for a group of creditors who are monitoring your account.
Some say that having too many inquiries into your credit report have have a negative impact on your ability to get credit. Though this may be the case sometimes, it’s not always true. In fact some of the inquiry information is left off of FICO scores entirely.
Fixing Mistakes
If you do find problematic information in your credit report, there is a form that should accompany a report that allows you to report this information to the credit reporting agency. Just follow the instructions on the form and submit it. You can expect this process to take a bit of time has creditors have 30 days to respond to any dispute you may have with information on your credit report. It is worth doing however, because it’s widely believed that over 75% of all credit reports have some type of information on them that should not be there.
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