How To Read a Credit Report

Introduction

If you’ve ever applied for a loan or line of credit, you probably know that your credit score — which is calculated using information contained in your credit reports — is one of the main factors used to make lending decisions. Understanding what your credit reports say about your borrowing and repayment history can help predict how likely you are to be approved for credit, and which rates and terms you may qualify for.

What Is a Credit Report?

Your credit report is a detailed document that lays out your credit history, including credit inquiries, borrowing history, and public records related to finances. It includes a list of your credit accounts, complete with balances and payment activity.

You have three credit reports because each of the main credit bureaus — Experian, Equifax and TransUnion — generate their own reports based on information they’ve received from lenders. And not every lender or creditor reports the same things to each bureau.

Knowing what’s in your credit report reduces the chances of getting a nasty surprise when you apply for credit. Under the Fair Credit Reporting Act, you’re entitled to receive a free copy of your credit report from each of the three major credit reporting agencies every year. But now you can get free access every week at AnnualCreditReport.com, which is endorsed by the federal government.

What Information Is Present in a Credit Report?

Credit reports contain four main types of information, and you should review all of them for accuracy and completeness. Any credit report errors could potentially affect your credit score, so you want to catch them early.

Personal Information

The first section of your credit report contains personal data, including your name, Social Security number, address, previous addresses, birthdate, and employment history. This information isn’t used to calculate your credit score, but it does verify your identity. A mistake in this section could be a simple clerical error, or it could be an indication that your credit file has been compromised or mixed up with someone else’s.

Account Information

In this section, you’ll find information about open and closed accounts in your name, including:

• Account type – This field shows whether the account is a mortgage, auto loan, credit card, etc.
• Account status – This section shows whether the account is open, closed, in good standing, delinquent, or charged off. If the account’s closed, you’ll also see an estimate of how long it will stay on your credit report.
• Opening date – This is the date you opened the account, which is important because the length of your credit history influences your credit score. Typically, a longer credit history has a more favorable impact on your credit score than a shorter history.
• Account balance – This line shows how much you currently owe on your account. Combined with your credit limits, the reported amount affects your credit utilization ratio, which can determine up to 30% of your credit score.
• Credit limit – If you have revolving accounts (like a credit card, home equity line of credit, or personal line of credit), this field shows the maximum amount of credit you have at your disposal. If you have installment loans (such as a mortgage, auto loan, or student loan), it shows the initial amount you borrowed when you got the loan.
• Payment history – This section shows your payment status for each month the account was open. It will indicate if the payment was on time, and identify late payments that were 30, 60, 90, or 120 days or more past due.

Public Records and Collections

This section contains information that’s on public record with state and county courts, including bankruptcies, foreclosures, tax liens, and civil judgments. Accounts that have been sent to a collections agency also appear here.

Credit Inquiries

This is a list of all the entities that have requested a copy of your credit report, which may include lenders, landlords, employers, and insurance companies. These inquiries may be either “hard ” or “soft” pulls, but only you can see the soft ones. A hard inquiry, or hard pull, could lower your credit score by a few points while a soft credit check does not affect your credit score.

How To Read a Credit Report

A credit report is usually several pages long, but you can take it one piece at a time. Read through each of the four sections carefully and thoroughly, then cross-reference it to your records.

Your goal here involves four parts:

1. See what’s in your credit report

2. Understand why it’s there

3. Identify any mistakes

4. Fix the errors you find

Checking your credit report gives you a better idea of how lenders see you, and what the response will be if you apply for more credit. Most of the information should form a valid representation of your credit history, and this lets you know any habits you need to adopt — like paying on time, every time, and not maxing out your cards.

Errors are quite common, and they could falsely impact your credit score. So it’s important to dispute them and try to get them corrected as soon as possible. This could be an account you didn’t open, inaccurate payment information, an address where you never lived, or something that happened too long ago to still be on your report.

To dispute an error on your credit report, contact the credit reporting agency — or all three if the error appears in all your credit reports. You can submit your dispute online, in writing, or by phone. If possible, you should also contact the party that provided the information in question. The bureaus will conduct investigations and report their findings to you, typically within 30 days.

Bottom Line

Once you know how to properly read your credit report, you’ll have a pretty good idea of what the financial world sees when they look at your profile. You’ll also be able to keep track of your payment history, identify the positive or negative trends, and correct any errors.

Regularly inspecting your credit report is crucial, but you don’t have to wade through the whole thing every single time. Credit One Bank offers free monthly access to your credit report summary and credit score if you’re a cardmember. You can even see if you pre-qualify without impacting your credit score.