How Do I Read A Credit Report – A Simple Guide
June 7th, 2010
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.
That is the purpose of this article. It will provide a basic overview of the standard credit report. It will give the reader a guide on how to read and understand their 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 the question is… How do I read my credit report?
It is no surprise to learn that all 3 of the main bureaus do their reports different. However that is not an issue because all credit reports have four basic sections: Identity Info, Credit History, Public Records, and Inquiries.
1) Identifying Information: This section tells everyone who you are. Your social security number, your date of birth, and your name. Your name can be listed more than once to show each different way it has been spelled over the years. If some car dealership ran an inquiry on you 10 years ago and misspelled your name, it will be on your credit report forever. Of course for females it is going to list your maiden last name and your married last name, then if you got divorced and went back to the maiden name, if you remarried, etc. There can be a lot of variations of your name here. The important thing is to look at each one to make sure you recognize it.
Other information in this identity section may include your include your current address, your previous addresses, and telephone numbers. Also driver’s license numbers, your employer, previous employers, your spouse name, etc. Anything that contributes to indentifying 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 you have you paid on your accounts is one of the main things that those checking your credit are looking for. It is indicated with 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 is a number from 1 to 9. The 1 indicates that there have been no delinquencies and the account is current and paid on time. The 9 indicates numerous delinquencies, missed payments, partial payments, etc. Obviously 1 is the best, then 9 is the worst, and then there’s all the stages in between. Bottom line, anything other than a 1 is not looked at too favorably.
Once explained these codes are not that difficult to understand. Creditors are looking for I1 and R1. Nevertheless, they often cause questions. One of the bureaus has started to 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 the name says, this section contains a list of companies that have requested to pull your credit report.
Your credit inquires and divided into two kinds. Soft inquires are from companies looking to send out promotional information to a group, or either your current creditors monitoring your account. Then Hard inquiries are the ones that you initiated yourself by applying for credit somewhere like car financing, a loan, credit card, etc.
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 we mentioned earlier, there are a lot of credit companies who all get their information directly, or indirectly, from one of the three major credit bureaus. They then arrange their reports in many different ways, and put things in different order. But all credit reports 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.
Some in the consumer credit industry estimate that as many as 80 percent of all credit reports have some kind of mistake, misinformation, or contains something that 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 this article has been a benefit to you. Our intent was to provide the basic information that would show anyone how to interpret and read a credit report. It is the only way to determine if it is correct, or if you need to take action to have it updated. If you are planning on buying a home, a car, or applying for any kind of credit in the near future, then you need to know what is on your credit report before it is reviewed. It is never considered as an inquiry when you request your own credit report.
For over 10 years Consumers Info USA has been connecting people with the online services they need to help them live better. Go Now for more information on how to check your credit report and a link to order your online credit report
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