How to read a credit report to improve your score

Most Americans today suffer from less than stellar credit.  The very first step in improving your credit involves ordering free personal credit reports from the three major credit bureaus, Experian, Equifax and TransUnion.  However, once the credit reports arrive to you, it is filled with abbreviations, numbers, terminology, and difficult formatting.  In order to begin repairing your credit, it is important that you learn how to read a credit report.

The credit reports that you obtain from the credit bureaus are consumer files, and thus, they are consumer friendly.  Of all of the reports, the Experian report is easier to read because it is written in simple English.  The Experian personal credit report uses plain statements about your credit history, such as “never pays late,” while other credit reports use codes ranging from 1 – 9, with 1 being the best payment history.  You may view a sample credit report at www.consumerinfo.com/n/expsam.htm .

The important sections of your personal credit report

For TransUnion, Experian, and Equifax, your free credit report is divided generally into five common sections: identity information, credit history, public records, collection accounts, and inquiries into your file.  It is important to learn how to read a credit report through each of these sections.

Identity Information Section

Identity information is exactly that – information that identifies you.  It includes your name, social security number, current and previous address, telephone numbers, and date of birth.  It usually also states your past and present employers, as well as your spouse’s name.

Credit History

Credit history can also be referred to as “tradelines.”  The creditor’s name and account number will be listed in this section, although sometimes for security the numbers will be scrambled.  You may have more than one listing with the same creditor, depending upon whether they are reworking or transferring the loan.

There are a myriad of facts listed in this section:

• Date that the account was opened.
• Type of credit, such as auto loan, credit card, mortgage or installment loan.
• Joint or individual account determines whether you independent preside over the account or share it with another person.
• Number of months that have been reviewed of the account history.
• Date of last activity shows either the date of your last charge or the last payment made.
• Amount of high credit indicates the original amount of the loan; if it is a credit card, the maximum credit limit may be shown.
• Terms of the loan are usually the amount of monthly installments that will repay the loan; revolving accounts are left blank.
• Balance is the amount owed when it had been reported.
• Past due amounts are shown if there are any at the time of reporting.
• Status is an indication of payment history and the type of account it is.  I = Individual, R = Revolving, and O = Other.
• Report date is listed to indicate you the last time the activity of account had been updated.

Public Records

This public records section could also be called courthouse records.  This section lists any information that is considered public items, such as judgments, tax liens, and bankruptcy records.  Child support obligations may be listed in this section if the payments are overdue.  However, only financial data is shown in the public records – criminal activities and arrests are not part of the credit report.

Collection Accounts

This is where collection agencies report accounts turned over to them.  It usually lists the amount due and the original creditor.  It is important to check these carefully to ensure there is no incorrect information.

Inquiries

In this section, you will find all of the businesses that may have requested your report with 24 months.  Some inquiries are “hard,” while others are “soft.”  The classification of “hard” means someone that you have given permission to pull your credit, whereas “soft” refers to companies that may be checking credit status for pre-approval offers.

Carefully review each personal credit report

The three major credit bureaus, Experian, Equifax, and TransUnion, all contain slightly different information in their personal credit reports.   On one report, you may have information from one creditor that is not on the other two credit reports.  There are usually time delays from reporting that cause the scoring on your credit history to be variable.

Once you have understood how to read your credit report, it is important to check all three personal credit reports for errors and information that could be causing your low credit score.  Dispute all inaccuracies to have them removed.  You can repair your credit by being astute while investigating your own credit report.

Related Articles:

• Watching Your Credit by Ordering Your Credit Reports
• Repair Your Credit
• Debt Consolidation – What to Look For, What to Watch Out For
• Credit Scoring is like a Teeter Totter
• Credit Report Errors? Or Deliberate Misreporting?