How To Read A Credit Report Guide

Obtaining your credit report is a very smart move in the current economy. However, when you receive your copy you will soon discover that it is not the easiest document to read and understand. How to read a credit report properly is an essential skill that you will need to learn as it will give you a better understanding of how your credit score is calculated.

Understanding how to read your credit report just takes a little time and the following guide will help you grasp what the report is all about.

What Exactly Is In My Credit Report?

It is important to point out that there are 3 types of credit reports you can obtain. Each one is collated and produce by a separate credit collection bureau. The credit bureaus in question are Experian, Equifax and Transunion. You should obtain a copy of each bureaus report as they the financial data contained may be different from each other.

The structure of the content within each report can also differ however, the contents can be generally grouped in the following categories.

1. Personal information

This section will contain information about your name, home/work addresses and employment history, date of birth and your social security number. This information is used to identify who you are and will not be used by creditors to determine your credit worth. It is important to check that this information is not relating to someone else.

If you have a joint account the details of your partner will also be included in this section.

2. Credit Account

This section includes the types of accounts that you have with each of your creditors. This will itemize the number of accounts you actually have whether they are mortgages, credit cards or loans. This section will also show the total number and balance of all your accounts combined.

This section will also include any delinquent accounts that you may have.

3. Credit history

The credit history section is probably the most comprehensive part of the report in terms of the amount of information contained within it. It goes into more detail about each account that you hold. For example, in this section you will see the date the account was opened, the amount of the monthly payments and the account number.

For security reasons only the first 4 digits of the account are visible.

This section will also contain information about your payment history from the date you opened any account. This will include any balances that are past due. There is also a remarks section where your creditors will leave a comment about how you have handled the account or how long a outstanding balance has been due.

This section should be read through and checked carefully for any errors as this can have a big effect on your credit score.

4. Public records

As well as your creditors, credit reporting agencies can also collect information about you from public sector organizations and the county courts. The financial information that they can collect from these bodies can include bankruptcies, court judgments, house foreclosures etc.

You will want to make sure that this section is blank as any of the above entries can have a detrimental affect on your credit worth.

5. Enquiries

An enquiry simply means that your account has been accessed to check it out. There are a two types of enquiries which are referred to hard and soft enquiries. Hard enquiries are the type that the banks and other lending institutions will be interested in. A hard enquiry is when a bank or lender accesses your report to make background checks. The common purpose is when when you make an application for a loan or mortgage. This can also include voluntary enquiries made by yourself.

Soft enquiries are when banks or lending institutions want to access your contact details in order to send you marketing materials relating to financial products such as, credit cards or home insurance. From your report you will be able to see enquiries going back over the last 2 years.

Although, it is not a problem to have a lot of enquiries on your report, your credit score can be negatively affected if many of these creditors are not related. This could raise a red flag that could suggest that you are being quite aggressive in applying for different credit lines.

When You Find A Mistake

It is not uncommon to find information in your report that is out of date or incorrect. If you discover any then, you can dispute this with the relevant bureau. The most common way to approach this is to submit a dispute letter. This should also be accompanied by a photo copy of your report with the mistakes highlighted. It is also a good idea to submit supporting documents to strengthen your case. The bureau must look into your case within 30 days of receiving your dispute letter.

How to read a credit report is not the most difficult thing to learn in the world but most people do not understand it even when they obtain one. By understanding your report you will join an exclusive minority who will benefit when it comes to improving their credit risk and financial future.

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