How Do I Read My Credit Report – An Easy Guide

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.

In the United States there are only 3 main credit bureaus. Trans Union, Equifax and Experian (use to be TRW). Any other bureau which may be in your area is somehow affiliated with one of these 3 main bureaus. Also any individual, or company, who pulls your credit report, is getting it indirectly or directly from one of these three main bureaus. They are the only credit bureaus that matter in the U.S.

So now the question... How do I read my credit report?

It should not be a surprise when we tell you that all 3 of the main bureaus do their reports different. But regardless it is not a problem because all credit reports have 4 basic sections: Identity Information, Credit History, Inquires, and Public Records.

1) Identity Information: This Identity Information section tells anyone reading the credit report exactly who you are. Name, date of birth, and social security number. Names may be listed more than once to reflect each way it has been previously spelled. If you applied for credit before and someone misspelled your name on the inquiry, it will be on your credit report indefinitely. Then if you are a female 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. There is a possibility that you will see a lot of variations of your name. The important thing is that you review it closely to look for anything you 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 section may also be called your trade lines, or your account list. This section will show all your current accounts and the credit that 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 of this code is a letter that is either an I or a R. The I means installment or fixed loan, these are set loans with a fixed payment amount, like signature loans, car loans, mortgages, etc. And R means revolving which is credit cards, department store cards, or 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: Like the name sounds, this section lists all of the companies that have requested your credit report

There are two types of credit inquires. Soft inquires are from companies who want to send out promotional information to a group, or either your current creditors monitoring your account. Then there are Hard inquiries which are the ones that you made happen by applying for credit somewhere like a loan, car financing, credit card, etc.

A lot of people are very concern about inquires making a negative impact on their credit. This can be true but it usually take a whole lot of inquires before it will affect you. Certain amounts are expected and considered normal in life. When you want to buy something like a house, or a car, you are expected to shop around, and two or more of these types inquires in a 14 day period counts as just one inquiry.

As was said earlier, there are lots of credit companies who all get their information directly, or indirectly, from one of the 3 major credit bureaus. Then they all format their reports in different ways, and put things in different order. But all credit reports will have these four 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 people in the credit industry agree that as much as 80% of all credit reports contain some kind of error, misinformation, or has not been updated.

If you do see a mistake or something that dose not read correctly. You will need to talk to each of the 3 bureaus. You can fax acceptable documents directly to them, like receipts or invoices. If you do not have any proof then the creditors will have to be contacted and they 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.

By: Greg Ford

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