How to Read a Credit Report - Tips on Reading Your Reports
For the benefit of all readers, let me start by explaining why it's important to read the information contained in your credit file. Then we will address the "how" side of things.
I usually recommend ordering and reading your credit reports about once every two years. It's a good way to identify any errors that need to be corrected, and to spot any cases of identity theft. You should read your credit report and know what's in it, because it has a lot to do with whether or not you get approved for financing. The information in these reports is used to produce your credit scores, and those scores are used by lenders when they consider you for a loan.
This answers the "why" of reading credit reports. It helps you identify and correct erroneous information, and it can alert you to any cases of identity theft. Now let's talk about the "how" side of things.
How to Read Your Credit Information
When you receive copies of your credit report, one of the first things you'll realize is that they are broken up into three major sections. Understanding these sections will help you read them. So let's examine the main parts of a credit report and what you should know when reading through them.
Personal Information:
The section at the top of your report will contain personal information about you. This includes your name, SSN, date of birth, current address and similar items. Read this part of your credit report carefully with an eye out for errors. For example, if you see an error with the date of birth or Social Security number, you'll need to correct that information ASAP. It might be mean that your credit information is mixed up with somebody else's. Unfortunately, this happens quite often, so it's another good reason to read your credit report once or twice a year.
Account History:
This part of your report will provide a list of all credit accounts that are currently open. This will include such things as car loans, credit cards, mortgage loans, and any other accounts that remain open. Read carefully through this section of your credit report and keep an eye out for accounts that should be closed, or any accounts that aren't yours. If you find items that should no longer be listed on your report, dispute it with the company that created that particular report (TransUnion, Experian or Equifax).
The account history is an important part of your report, and it has a lot to do with your credit score. For example, if you have negative information such as late / past-due payments, this is where they will show up. Keep this in mind when you read your credit report and have all errors removed from this section.
Public Record Information:
IF you have ever had a legal action filed against you, such as bankruptcy, civil suits or other legal judgments, this is where they will show up. These items appear on your report because they affect your credit. With that being said, there are limits to how long negative information can stay on your credit report, so when you read through this section keep the following time limits in mind. Bankruptcies can stay on your credit for up to 10 years. For all other negative information, a 7-year limit applies.
Inquiry Information:
Anytime a credit makes a credit inquiry on you, it shows up on your report. For example, if you apply for a car loan and the dealer "runs your credit," they are making an inquiry that will later show up on your credit report. Read this section with an eye out for unauthorized inquiries (people need your permission to do a credit check on you).
So let's summarize everything we have covered:
- It's important to read your credit report about every two years. This allows you to correct any errors and spot potential cases of identity theft.
- Reading your credit report is not as hard as you might think. It will actually come with a reference guide explaining what each section means, and what to do if you find errors.
- If you find any errors when reading your credit reports you should begin the dispute process immediately, because it can take time to correct errors. All of the credit reporting agencies
- Pay particular attention to the account history section of your report, and also the public information section. Negative information within one of these two areas can drag down your credit score, so if there are any mistakes here you'll want to correct them as soon as you can.
- If you have any other questions about how to read a credit report or anything else related to this topic, just type your question into the box provided at the top of this blog. We will do our best to help you.
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Posted on Thursday, November 6, 2008 | Permanent Link
