How To Read a Credit Report
Do you know how to read a credit report? It reveals a lot of information about you:
Credit you’ve had over several years
Whether you paid your credit accounts on time
How long you’ve held your credit accounts
If they were paid off or turned over to a collection agency
This information is visible in the report and it’s used to calculate your credit score. Creditors, employers, business partners and landlords view your credit report. They use it to decide whether they will lend to you, do business with you, or rent to you.
Knowing how to read credit reports is important. You must look at your credit profile a couple of times each year so you will know what’s being reported. Then you can clean up anything negative that could torpedo your score. You can easily obtain most of your credit records online.
Credit reporting is complex. You can lose your way trying to figure out the terms used to report credit information. You’ll develop a knack for it and it will pay off.
Understanding Credit Reports
Most consumer credit reports are segmented into 4 – 5 different sections. This helps present information in an organized manner. These include: Personal identifying information, public records, summary, credit history, and inquiries.
First, you’ll see that the report reveals your financial and personal information. Credit depositories collect variations of your name so that you can be cross referenced. This assists credit reporting agencies in associating you with accounts that may be spread across regions and time periods.
The Consumer Identifying Information Section lists items including:
- Current address
- Social security number
- Date of birth
- Spouse’s name (if applicable)
- Employer’s name (if available)
Problems arise when your report links you to someone else having similar names, initials and addresses. Even social security numbers can appear in your report incorrectly. This is easy to correct and it’s why you must know how to read a credit report.
Incorrect account information may be negative. You should always verify what is being reported is really about you and not someone else. Keep this in mind especially if you are applying for a job or some other major transaction.
Sometimes opening up an investigation will cause reporting delays and factual errors to occur. You wouldn’t want to miss deadlines for a home loan or a job you want. This is a risk of opening up a credit investigation. It could cause decision makers to “suspend” your application until you get everything worked out and problems resolved.
When reading your credit report you’ll see your address and your employer listed. The information is collected from many sources so employment and residence information over several years is often included.
Reports may contain the name of your spouse, your telephone numbers, and even your birth date. We’ve heard people say that their credit report contained their driver license number.
How To Read Credit Reports The Easy Way
The report is divided into different segments called the credit profile sections. These present an easy way to organize the different topics related to your credit history. Just take it slow and look for the headings with the word “section” and then read what information is contained in each.
We give you examples so that you can get an idea of the kind of information you’ll see. Read the following brief descriptions for each section.
The report’s Summary section summarizes details about the accounts your report contains. It lists the number of credit accounts, balances, how many are open and how many of them are delinquent.
Here’s a list of the kinds of accounts in the Summary:
- Installment credit accounts
- Revolving credit accounts
- Defaulted accounts, Charge offs
- Mortgages; current and paid-off
- Public records: Judgements, liens, unpaid child support, bankruptcies*
* (reported up to 10 years)
After the Summary of accounts and public records is a section usually named the “Credit Account History.”
The report’s Account History is where much of the detailed information about your credit history is found. Individual accounts are usually referred to as trade lines. For each of your accounts here’s where you will see:
- Creditor name – May be abbreviated
- Account numbers with the creditor – (abbreviated for security)
- Account holder name – whether the account is held individually or jointly
Account Holder Section
This contains codes such as these:
I – Individual, J – Joint, A – Authorized User, C – Co-signer, U – Undesignated, S – Shared, T – Terminated
- Date Reported – The most recent reporting date by the creditor.
- Minimum monthly payment amount.
- Account balance on the reporting date.
- Credit amounts past their payment due dates.
- Balance – Displays the amount owed as of the most recent reporting period.
- The creditor may have inserted comments about your account.
- Payment history/Months Reviewed – The number of months the account has been reported.
- Terms – For revolving accounts (credit cards) this is usually blank. For installment accounts the payment and duration of the loan is usually listed.
- High Credit – Varies with type of credit: Revolving credit shows the highest amount charged and account limits. Installment loans show the amount.
- Type of account: revolving (credit cards), installment loans (e.g., student loans, auto financing, etc).
Letters used to indicate the account type include:
O – Open, R – Revolving, I – Installment
Account status, e.g., whether it’s current or late, or if it has defaulted and become a charged-off account. This is also referred to as the Past Due column. The status is commonly displayed as numbers to denote the timeliness of payments.
- 0 or sometimes
- 1 – Current account, paid as agreed
- 2 through 9 – Number of months past due
Date Opened – Shows when the account was opened
Last Activity – The last date the account was used or paid
Additional Information Section
Most credit reports have this section for clarification of information that may be reported about you. It contains personally identifying information, previous employers and addresses.
This section lists credit inquiries you’ve had over the past couple of years. You will probably want to review this to see who has received your credit report. Think about what they may have done with the information.
Most credit reports contain contact information for whoever ran inquiries about you. If you spot any that you didn’t authorize to run a “credit check” then you may want to investigate further.
You may see a credit report that lists a credit score. The one most commonly used by lenders is called a FICO score. Like other scoring systems, this considers factors such as the length of time you’ve established credit, payment history and the ratio of current revolving credit card balances to the total credit allowed on them.
Collection Accounts Section
Standard credit reports retain a section that displays collection accounts for you over the past 7 years. This has the name of the collection company and the amount of the debt they are trying to collect. This is one area you will want to be keenly aware of. It is typically where a lot of credit repair work is done.
Remember when we discussed how often names and other identifying information in credit reports is incorrect? Mistakes occur not only with personal names. It also happens with disputed amounts creditors claim is being owed. Dates for accounts and payments reported by collection agents are often incorrect too.
This provides you with opportunities for asserting your rights as a consumer. This is it’s important for you to know how to read a credit report. You should dispute items being reported negatively about you.
And you’ll need contact information for the collection agent to send them dispute letters. We go into greater detail on this topic in the credit repair article.
For an easy to follow lesson, see this article on reading credit reports.