Reading Your Credit Report

Understanding your credit report is the best way to find mistakes and even identity theft.


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Obtaining a copy of your credit report is just the first step - the next step is to read and understand the information it contains. Above all, make sure the report contains accurate information. Any serious inaccuracies (slightly outdated information is common) could negatively affect your credit rating or be a sign of identity theft.

Another important reason to review your credit report is to make sure that any potentially negative information has been removed in the timeframe mandated by law. Information about late payments, liens, suits and judgments must be removed after seven years. Bankruptcies must be removed after ten years. Tax liens that were unpaid can remain for up to 15 years.

To make matters a bit confusing, you do not have just one credit report. There are three national credit bureaus, also known as national credit reporting agencies - Experian™, TransUnion™ and Equifax™ - and each bureau maintains a report on you. You must review all three reports since each bureau assembles information in different ways, and information on one report may not be present on another. If you have not already received copies of your credit reports, know that you are entitled to a free copy of each of your reports annually from or by calling (877) 322-8228.

Please note: Obtaining your credit reports through the Annual Credit Report website is free. You may be offered other products and services, such as your FICO score or a credit monitoring service when you click through to each credit bureau's website. These are optional services.

There are several sections that are included in all credit reports:

Section 1: Identifying Information

This section includes your name, social security number, current and previous addresses, birth date, driver's license number, telephone number and even your employer. If you are married, you may find your spouse's name listed as well.

Scan the information to make sure it is accurate, as there may be some discrepancies. For example, the report may list a misspelling of your name or it may state that you still live at an old address. Because methods of gathering personal information are not exact, some variation is normal. Look out for addresses that you were never associated with, driver's or Social Security numbers that do not match, and mistaken employment information, as these inaccuracies could be signs of identity theft.

Section 2: Credit History

This section lists the names of your current and past creditors, associated accounts and your payment history. Among other information, this section includes:

  • The age of the account (when the account was opened).
  • The type of account (credit card, merchant or store card, mortgage, auto loan, credit line, etc.).
  • The total amount of the loan and how much is owed (outstanding balance).
  • The monthly payments.
  • Who "owns" or is responsible for the account (you individually or you jointly with a co-signer or spouse). If you are an authorized user on an account, although you are not responsible for the account, the credit history for the account is attributed to you and you get both the benefit and any negatives that may result from the performance of the account.
  • The status of the account (open, closed, inactive, paid in full, etc.).

Each account also lists your payment history, including missed payments, collections, charge-offs or defaults.

Review the credit history section carefully, paying close attention to any potentially inaccurate information. Almost everyone misses an occasional payment, but repeated missed payments (particularly those more than 60 days late), collections, charge-offs and defaults are serious issues that will lower your credit score, making it more difficult and expensive to get credit in the future.

Each credit bureau writes payment history information in slightly different ways, ranging from easily understood phrases to numeric codes. When codes are used in the payment history section of the credit report, lower numbers are better. Other reports use a color-coded system in which green is best.

Information in this section typically remains on the credit report for approximately seven years.

Section 3: Public Records

This section includes finance-related legal proceedings: bankruptcy, tax liens, foreclosures, repossessions and judgments. Needless to say, information in this section could have a major impact on your credit and credit score. Although there's not much you may be able to do about public records you may have, continuing to pay all your bills on time and reducing the amount of credit you are using are good strategies for raising your credit rating. On the other hand, inaccurate information in this section could be a sign of identity theft so review this section carefully.

With the exception of bankruptcies and tax liens, information in this section typically dates back seven years. If the information is accurate, there is no way to legally remove it.

Section 4: Credit Inquiries

Credit inquires are occasions when your credit report has been accessed for any reason. These inquiries may be "hard" or "soft." Hard inquiries are those that you initiate by applying for credit. Soft inquiries are those typically initiated by a lender who wants to potentially include you in a "preapproved" or promotional marketing program, or these inquiries could be initiated by your current creditors conducting an annual review to check for problems that may affect your creditworthiness.

Soft inquires do not affect your credit score. Hard inquiries may affect your score, particularly if you initiate multiple new credit requests in a short amount of time.

Other Information

Depending on the credit report and your personal situation, there may be other sections on your reports such as "Dispute File Information" and "Reason Codes." In the event you once disputed a negative item on your credit report, that information will be reported in the Dispute File Information section. Reason codes are tips that are intended to help you understand negative information on the report and offer guidance on improving your credit.

You may also find a section on "Collection Accounts" - accounts that have been turned over to a collection agency. Collection accounts may appear as part of the account history or may be in a separate section depending on the bureau. If you find collection accounts that are not yours, you will need to report it to the credit bureau. If you find a collection that is yours but you weren't aware of it, you will want to contact the collection agency or the creditor to resolve the matter.

If You Find an Error

As mentioned earlier, slightly outdated information is common on credit reports. In fact, most credit reports will have some kind of minor inaccuracy. Some key items to look for are accounts that you did not open, inaccurate information about public records, and inaccurate payment information.

Each credit bureau has a process for addressing inaccurate information that you may initiate by visiting their website, mailing a printed form, or by calling them. If you suspect identity theft, you will want to place an immediate fraud alert in your file.

Correcting information on credit reports can take months, during which time you may be denied credit or charged higher interest rates, so if you find inaccurate information, act immediately to contact the credit bureau and correct the problem.

UP NEXT: Avoiding Identity Theft >>

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