We’re sure you’re familiar with the saying, “you are what you eat.” Well, the same goes for your credit score. Your credit report is a reflection of your financial habits, and if you want to maintain a good credit score, it’s essential to be aware of what’s in your report. In this blog post, we’ll teach you how to read your credit report so you can make sure there aren’t any surprises waiting for you.
Obtaining Your Credit Reports
The first step to reading your credit report is obtaining a copy of it. You are entitled to one free credit report every year from each of the three credit bureaus – Experian, Equifax, and TransUnion.
Reviewing Your Credit Report
Understanding your credit score is the most crucial part of reading your credit report. Your credit score is a number that represents how risky it is to extend credit to you. A high credit score means you’re a low-risk borrower, and a low credit score means you’re a high-risk borrower. Your credit score is determined by various factors, including your credit history, credit utilization, and credit inquiries. Your credit score can impact your ability to get a loan, rent an apartment, or even get a job.
Each of the three credit bureaus has a different structure, but each report has four main categories. Each section provides valuable information about your credit history. We’ll go through each category below.
Identifying Information
The first section of your credit report is the identifying information. This includes your name, social security number, date of birth, and other personal information. Your report will detail both current and past addresses, as well as contact information such as phone numbers and email addresses.
Additionally, your credit report may contain current and previous employers. While your employment history has no bearing on your credit score, it might be verified to ensure your identity, so finding incorrect information like company names you don’t recognize or employers you never worked for is a red flag.
Ensure that all of your identifying information is correct in your credit report. A misspelled name, an unfamiliar address or phone number, or a misplaced digit in the Social Security Number are all indications that your credit report may have been hacked. Any personal information on your credit report should be relevant to you personally. Take the time to double-check that it’s correct 100%.
Account History
The next section is your account history. This is by far the most substantial portion of your credit report. This lists all of the credit accounts in your credit file, along with details such as amounts owed, length of credit history, and payment history.
The most vital pieces of information used to compute your credit score are listed in this part. The following components will appear in your credit report account history:
- Open and closed credit accounts
- Names of creditors and lenders
- Record of all on-time and late payments
- Current balances
- Current credit limits and original loan amounts
- Account status
Even after you’ve paid off a debt or closed a loan, your credit report will retain records of it for some time. Examine all details of your account history to make sure they’re correct and if you don’t recognize an issuer, notify the credit bureau.
Public Records
This section contains any public records that are associated with your credit file. This could include bankruptcies, judgments, or liens. These types of records may be reported on your credit report for seven years: Chapter 7 bankruptcy will stay there for ten years.
Any public record on a credit report must include your correct personal information and be verified via the court system at least once every 90 days. Furthermore, judgments from either the federal or state government do not affect your credit score and should not be reported. If you discover a tax lien on your credit report, you must dispute the error with one of the three major credit bureaus.
Credit Inquiries
The credit inquiries section lists anyone who has pulled your credit report in the past two years. There are two types of credit inquiries:
- Soft inquiries result from checking your credit or if a company issues a pre-approved offer.
- Hard inquiries appear when you apply for a new credit card or loan.
Soft inquiries do not affect your credit score, but each hard inquiry typically lowers your credit score by a few points. Hard inquiries are important since they may suggest an increased risk to lenders as they figure out why you want or require more credit.
Importance of Your Credit Report
Your credit report is one of the most important financial documents you have. It’s a reflection of your credit history and creditworthiness. Your credit score is derived from the information in your credit report, so all details must be correct.
Mistakes happen – if you find incorrect or outdated information on your credit report, make sure to dispute it with the credit bureau. This will help ensure that your credit score is as accurate as possible. Regularly checking your credit report for errors is one of the best ways to maintain a healthy credit score and protect your finances.
At the end of the day, your credit report is an important reflection of your financial history and status. By understanding how to read and interpret your credit report, you can make better decisions about your credit and overall financial health.
Credit reports can be confusing, but by understanding the different sections and what they mean, you can ensure that everything is correct and up-to-date. Stay informed and stay in control of your credit report!
The Bottom Line
Now that you understand the different sections of a credit report and what each means, it’s time to take action. You can start by ordering your free credit reports from AnnualCreditReport.com. This website provides a full report from all three credit bureaus once every 12 months.
Once you have your reports in hand, Credit Card Chest offers several products to monitor your credit score so you can stay on top of your finances. It’s important to be proactive about understanding and managing your credit rating because a high credit score equals low-interest rates, good borrowing opportunities, and peace of mind.
Thanks for following along as we explored how to read a credit report – now go get started!
