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Learn How to Read and Understand Your Credit Report

If you are in the process of shopping for a loan, or if you have recently been the subject of a data breach, you may be told to check your credit report. Doing so can give you a window into what is going on in your financial life. It also can show you how lenders and other institutions perceive you.

It also can show you how lenders and other institutions perceive you. This article will go over everything you need to know about credit reports:

  • What a credit report is,
  • What kind of information is in the report,
  • And how to order one.

Let’s get started.

Is Your Credit Report the Same Thing as Your Credit Score?

Two concepts which are easy to confuse are:

Credit Report

A credit report is precisely what the name indicates. It is a report that contains records on a consumer’s credit history.

Credit Score

A credit score is a numerical representation of your risk level based on the data contained in one or more credit reports.

While these two may sound interchangeable, they are not.

Just as consumers have more than one credit report, they also have more than one credit score. The most popular score used for assessing consumer risk is the FICO score.

You can think of a credit score as a tool which simplifies and consolidates the data from credit reports. It works as a time-saver since lenders can glance at it and make an instant decision about loan approval.

What is a Credit Report?

Credit reports are put together by credit bureaus. Credit bureaus, in turn, get their information from financial institutions such as banks, lenders, and so forth. When you do business with an institution which reports to credit bureaus, your activities will impact your report.

That means that if you are late with payments, your credit report will reveal that. Conversely, if you are keeping up with payments, that will reflect positively in the report.

The Structure of Your Credit Report

Once you receive your credit report, you will need to know how to read it and what kind of information it will provide.

Personal Information

Personal Information

While one credit report may differ from another, all will contain general information on your identity:

  • – Your name
  • – Address
  • – Birthdate
  • – Employer
  • – SSN

It is worth double-checking to make sure this data is accurate.

Creditor Information

Creditor Information

Here you will find a list of all of your (reported) credit accounts. For each, you should see:

  • – The start date for the statement
  • – The type of credit
  • – The amount
  • – The current balance
  • – The history of your payments

Current accounts are usually listed under “Accounts in Good Standing”. Those which are negatively impacting your report are listed under “Adverse Accounts.”

Previous Inquiries

Previous Inquiries

You likely are aware that credit checks can have an impact on your reports as well as your score. You can find a list of all checks in this section. Some you may have initiated yourself. Others you may not even be aware of. This information dates back two years.

Information on Public Records

Information on Public Records

This may include:

  • – Liens
  • – Bankruptcies
  • – Lawsuits
  • – Wage Garnishments
  • – And so forth.
Personal Statement

Personal Statement

Consumers have the option of submitting a statement to be listed on their reports. This may be useful in cases of identity theft, etc.

Also, some of the information on a credit report may be expressed using credit report codes.

For example:

  • – CURR ACCT: This is a current account. The account is in good standing.
  • – PAID: This is a closed account with zero balance remaining.
  • – BKLIQREQ: The balance on the account was dissolved through bankruptcy.
  • – CUR WAS 30-2: This is also a current account, but payments on it have been late two times. Each time the payment was 30 days overdue.
  • – DELINQ 30: This is an account with a 30 days overdue balance.

Learning to interpret these codes can help you understand your report.

How Can You View Your Credit Report?

Lenders typically rely on credit scores to make decisions, and many borrowers think they only need to find out their score before applying for a loan. But that is not the case. It is essential to view your report(s) so that you know what information has been used to generate your score.

Hopefully, the information in the reports is accurate. But mistakes are relatively common. For that reason, ordering a credit report on a regular basis is a wise move. This provides an opportunity to assess the report yourself to check for errors. If necessary, you can take action to correct them.

When Should You Order Your Credit Report?

Every US consumer is entitled to order one free credit report per year from each of the three major credit bureaus:

  • Experian
  • Equifax
  • TransUnion

Since each report may differ slightly from the others, there may be a temptation to order all three of the reports simultaneously. This is not the most effective option, however.

Imagine for example that you are planning to apply for a loan, and you discover your credit report has issues. You decide to correct the errors. You will need to check again to make sure that everything is fixed. At that point, think how useful it would be if you still had 1-2 free credit reports left to order for the year.

For this reason, it is recommended to spread out requests for free credit reports throughout the year. This also allows you to monitor your reports over the entire year and stay proactive in managing your credit reputation.

Common Credit Report Errors

Here are some errors to be on the lookout for:

  • Inconsistent information regarding the identity.
  • Errors in account information. For instance, an account which is current might say it is delinquent, or an account which is closed may still be listed as open.
  • Incorrect balance information. Check the current balance on account listings as well as credit limits and loan amounts.
  • Duplicate data.
  • Outdated information.

How to Correct Mistakes in Your Credit Report?

If you do discover an error in your report, you need to contact two parties:

  • The credit bureau in question
  • The furnisher (the lender which reported the incorrect data to the bureau)

Keep in Mind!

By checking up regularly on your report, you can catch errors early and take swift action to correct them. This can help you qualify for more competitive loans, and may also help you protect your identity.

Look up dispute letter templates for help proceeding. If you discover that your identity may have been stolen, you may also want to put a freeze on your credit and take other steps to protect your finances.