subject: How Do I Read My Credit Report - An Easy Guide [print this page] Kieran was looking to get a new car and stopped by a Honda dealer. She really wanted a particular Accord that they had. But was very upset when she learned they would not approve her for a loan. She was told it was due to a couple of things on her credit report showing unpaid and defaulted. Just recently, she happened to get a copy of her credit report for another matter; however she really didn't understand it. But she knew those accounts were already paid. Later that day she called the credit bureaus and faxed in the receipts. However the Honda dealer said everyone has to wait 90 days to re-apply. The Accord she really wanted sold. This situation could have been completely avoided and Kieran would have gotten that Accord if she only understood what the credit report said. Then she would have known to get it corrected and update it, BEFORE she ever applied for that car loan.
And that is the reason for this article. You will be given a basic overview of consumer credit reports. This article will be an easy guide on learning how to read and understand a credit report.
There are only 3 major credit bureaus in America. Experian (use to be TRW), Equifax, and Trans Union. Any other bureau that may be in your local area is in some way affiliated with one of these three major bureaus. Any person, or company, that pulls your credit is getting it either directly or indirectly from one of these three bureaus. These 3 are the only credit bureaus that matter in the U.S.
So... How do you read your credit report?
It is not surprising to hear that, Experian, Equifax, and Trans Union all do their reports differently. But overall it really doesn't matter because all credit reports are basically divided into four sections: Your Identifying Information, Your Credit History, Your Public Records, and the Inquiries which have been done on you.
1) Identity Info: This tells the world who you are. Name, social security number, and date of birth. Names can be listed repeatedly to show each way it has been spelled in the past. If you applied for credit anywhere and they misspelled your name on the inquiry, it is going to show on your credit report indefinitely. And naturally for females you will see the maiden last name and the married last name, also if you were divorced then went back to the maiden last name, if you marred again after that, etc. It is possible you will see a lot of variations of your name in this section. What is important is that you review it closely to look for anything you definitely do not recognize.
The additional info that will be in this section is the current address, previous addresses, and telephone numbers. Also the driver's license number, current employer, all past employers, the spouse name, etc. Any info that helps to indentify who you are
2) Credit History: This is also sometimes called the accounts list, or your trade lines. This section will list your current and active accounts as well as any credit you have had in the past that was reported to the credit bureau.
Generally, the Credit History section will list everything in the past 7 years. Many agree that the credit bureaus computers delete anything with a "date of last activity" over 7 years. For Example if you got a MasterCard in January 1996, then stopped making payments in March 2004. Then the March 2004 is the date of last activity and when the 7 years starts to count down. Later on, you decide to send in a payment in October 2007. The countdown now starts over from October 2007 which becomes the new date of last activity.
This Credit History section includes the name of the creditor and the account number. It will also include:
*Date account was opened *If the account is in your name only or if there is a co-signer *Total amount of the loan, which is listed as the high credit limit, or highest amount on the credit card *Existing balance as of date of credit report *The fixed payments each month for loans, or the minimum due each month for credit cards *The status as of the date of the credit report (open, inactive, closed, paid, etc.) *How have the payments been made on the account
How good the payments have been made on these existing accounts is really the main thing that people checking your credits is looking for. This is indicated by a two part code.
The first part is a letter that will either be an I or an R. The I means installment loan, which is a set amount and set monthly payments such as a mortgage, car loan, student loan, etc. The R stands for revolving debt such as a credit card, department store card, line of credit, etc.
The second part of the code is a number that will be from 1 to 9. You can guess that 1 is the best which indicates no late payments and the account is current. And 9 would be the worse which indicates numerous late, partial or completely missed payments. So 1 is the best, and 9 is the worst, and then there are all the numbers in between. But in the credit world, anything other than a 1 means there was some sort of an issue with a payment.
When these codes are explained they are not that difficult to understand. People making credit decisions want to see I1 and R1. But, they still often caused questions. Some credit reports will insert plain language descriptions like typically 30 days late... never pays late... defaulted... etc.
3) Public Records: You do not want to see anything in this section. Only negative stuff that are the resort of court actions are listed in this section. Judgments, wage garnishments, bankruptcies, tax liens, etc. Something listed in this section will bring down your credit faster that anything else.
4) Inquires: Just as it sounds, this section is a list of everyone who asked to see your credit report.
Inquiries are divided into two types. Hard inquiries are the ones you initiate by applying for something like a loan, credit card, etc. Then Soft inquiries are from companies that want to send out promotional information to a pre-qualified group, it can also be your current creditors who are monitoring your account.
Most people are overly concern about inquires having a negative impact on their credit. It is true but it usually takes an awful lot of inquires before it will affect you. There is a certain amount that is just expected and considered normal. And when you want to buy something like a car, or a home, it is expected that you will shop around, therefore two or more of these type inquires in a 14 day period counts as just one.
As stated earlier, there are many credit companies who all get information either directly, or indirectly, from one of the main 3 credit bureaus. Then they format their credit reports in many different ways, and list things in different order. However they all will contain these 4 basic sections.
It is extremely important to know how to read your credit report. And knowing exactly what is on it is very important.
Many in the credit industry estimate that as many as 80% of all credit reports contain some kind of misinformation, mistake, or have not been updated.
If you do see an error on your report. You then need to speak to each of the bureaus, Trans Union, Experian and Equifax. You can fax directly to them, if you have acceptable documentation like a receipt or invoice. If not the creditors will have to be contacted and will have 30 days to respond.
We hope that this has been a benefit to you. Our goal was to provide the basic information that will teach anyone how to read and interpret a credit report. This is the only way to determine if it is correct, or if you need to have it updated. When you are planning to finance a car, buy a home, or applying for any kind of credit, you need to know what is on your credit report before the people making the decisions see it. Remember that when you request your own credit report it is never counts as an inquiry.
