If you want proof of your fiscal health, look no farther than your credit report. Learn how to read your credit report, and you’ll have a far better grasp of your financial situation. A credit report can look frightening, but it’s actually rather simple to understand the information included.
Lenders and other parties use your credit report to evaluate your credit score and make other financial decisions based on your financial history.
Reading all the information on your credit report may seem overwhelming, but it doesn’t have to be.What’s our top recommendation for improving your credit report? Learn the ins and outs of credit reports and review them annually for errors.
How To Get Your Credit Report
Before you can read your credit report, you’ll need to get hold of it. Each of the three major credit reporting agencies—Equifax, Experian, and TransUnion—will provide you with one free copy of your credit report each year upon request. If you order through AnnualCreditReport.com, you can get all three reports at once for free.
Why Credit Reports Are Important
The information contained in your credit report is a crucial indicator of your financial well-being. Your credit score determines how likely you are to be approved for a mortgage and other loans, as well as what credit card, insurance, and interest rate offers you will be presented with.
When you have strong credit, financial institutions are more likely to approve your credit requests, and you may even qualify for better loan terms and rates, such as a lower fixed-rate mortgage or a bigger credit limit on a credit card. Landlords will be more willing to let you rent a place if your credit is good.
If you have bad credit, You won’t have access to the greatest credit card perks; your interest rates and insurance premiums will be higher than average, and your credit limit will be smaller. Rental applications from people with poor credit histories may be denied, or they may be asked to provide higher down payments or even to find a cosigner with better credit.
To improve your credit score, it is important to first know where you stand. By checking it at least once a year, you can make sure it accurately reflects your financial condition and repair any mistakes if necessary.
How To Read Your Credit Report
Your credit report provides a five-part breakdown of your financial details.
Personal Information
Name (including previous names and aliases), Social Security number, and date of birth are all examples of personally identifiable information. Your current and former addresses, as well as other contact details like phone numbers and email addresses, will be included in the report.
Verify the accuracy of all of your personal information that appears on your credit report. Nothing on your credit record should be associated with anyone else, including family members, ex-lovers, or random people with similar names.
Signs that your report may have been mixed up with someone else’s include a misspelled name (even simply the wrong middle initial), an unfamiliar address, an extra or missing digit in the Social Security number, or a phone number that doesn’t belong to you.
Credit History
The credit report’s largest and most influential element is your credit history. Credit mix (10%), new credit (10%), length of credit history (15%), and total debt (30%) all play a role in determining your FICO credit score (10 percent). However, your payment history accounts for 35%-50% of your credit score (35 percent).
You should take the time to carefully examine for inaccuracies in your credit history, as this area of the report contains the most crucial information needed to calculate your credit score.
Your credit report will contain details about your financial history, such as:
Both open and closed accounts from up to ten years are included.
All accounts where you are an owner or authorized user count toward this total. Credit cards and home equity lines of credit are examples of revolving credit, while installment loans such as those used to purchase a car or a house are examples of installment loans.
Payment History
In particular, the credit history section shows whether or not your minimum payments were made on schedule. Unpaid bills will show up in negative accounts. The report will break down your unpaid bills into either 30, 60, 90, 120, or 150 days late.
Current funds.
Both the most recent balance and the largest balance in the account’s history are included here.
The list of debtors and loan providers
Names of lenders and creditors, as well as account opening dates, will be provided for each and every account. Personal spending habits aren’t detailed in credit reports.
Loan or credit limits
The outstanding balance on any open revolving credit accounts, as well as the initial loan amount for any open fixed-term installment loans
Dates of account opening and/or closing
The present standing of the account
It’s possible to find information on active, inactive, closed, paid, refinanced, transferred, and even foreclosed accounts. If a debt is more than 90 days past due, it is considered seriously overdue, and the account in question may be charged off.
Verify each detail of your credit report, including your account numbers, names, balances, payment dates, and statuses, to make sure they are accurate.
Verify the correctness of the account’s original loan amount or current credit limit. Having a smaller credit limit on file than what you actually have can have a negative effect on your credit utilization ratio.
Other possible mistakes:
- Accounts that were closed are falsely reported as active.
- Debts that have been wrongly marked as past due
- Misclassified as past due accounts certain accounts in good standing
- Misreported late payments or payments that were received on time
- Dates are wrong: dates of account activation/termination, last payment, and/or first delinquency
- several occurrences of the same account recorded under different creditors’ names (this can happen with delinquent accounts or accounts sent to collections)
- Create authorized user accounts that list you as the account holder.
- Verify that each of the accounts shown is actually yours. You need to dispute the error if you don’t recognize the issuer, locate an account that you didn’t open, discover an incorrect balance, or uncover any other fault. Inaccurate account information can be a sign of identity theft or other forms of fraud, but old information is one possible explanation when reviewing a credit report.
Credit Inquiries
When someone looks into your credit history, they leave a “credit inquiry” that details when and by whom they did so. The two primary types of credit checks are:
Soft Inquiries
Auto credit checks are examples of soft inquiries. Current creditors may perform soft inquiries, also known as soft credit checks, when they review your account or when they intend to send pre-approved offers.
Hard Inquiries
Detailed inquiries are more significant. These show up when you apply for new credit, an increase in your existing credit, a loan, or a mortgage, and the lender performs a credit check. Having a collection agency try to track you down might also lead to some challenging questions.
Hard inquiries have a negative impact on your credit score by a few points, whereas soft queries have no effect. Having a lender question your motives for requesting more credit (a hard inquiry) can be interpreted as an indication of higher risk.
Seeing a search that you didn’t make could be a sign of identity theft. If you apply for a loan or mortgage and then get many inquiries from lenders you’ve never dealt with before, this could be the cause. However, issuers normally treat comparable inquiries made within a short period of time as a single query (usually 45 days or less).
All inquiries should be deleted after two years, so double check the dates. You can always submit a disagreement and ask for the removal of a difficult question.
What To Do If You Find Errors On Your Credit Report
You can request an update to your credit report by filing a dispute with the credit bureau if you discover inaccurate or out-of-date information on it. Rectifying errors in your credit report is essential, since doing so will protect your credit score and application status in the future.
How To Dispute Credit Report Errors
Online disputes can be filed with Experian, TransUnion, and Equifax. There are a number of convenient options for filing your information and filing a dispute, including online, via mail, and via phone.
- You may file a dispute with Equifax either through the Internet or by sending a letter to Equifax Information Services, LLC, Post Office Box 740256, Atlanta, Georgia 30374-0256. Call (866) 349-5191 to have your complaint heard.
- The Experian credit report includes a toll-free number that you can call to dispute any errors that you see. Write to Experian at PO Box 4500, Allen, TX 75013 if you have a complaint.
- TransUnion: TransUnion Consumer Solutions, P.O. Box 2000, Chester, PA 19016-2000, or call their toll-free number at (800) 916-8800. Use the website’s request form, and don’t forget to fill it out completely.