Understanding Your Credit Report

So you’ve pulled your credit report, but you aren’t exactly sure what you’re reading. Don’t worry, that’s pretty common. Most people tend to see the accounts and get a gist of what’s listed, but that’s about it. So what are you reading and how do you clean this mess up? These days it’s hard to apply for a job without a credit check, so you need to be sure to keep an eye out on what’s going on in your credit report(s).

Who Looks at Your Credit Report?

Your credit report could be viewed by Employers (current or potential), Creditors (Mortgage, Credit Cards, Loans, etc.), Insurance companies, Landlords/Apartment Managers and various other companies or individuals who may need to see whether or not you’ll end up causing problems for them down the road.

Creditors will need to know whether or not you pay your bills every month, on-time or not, or whether or not you have too many credit cards or other open accounts. Some may be looking for any bankruptcies or tax liens, or whether or not you owe child support.

How to Read Your Credit Report

Your credit report is pretty straight forward. However, you may run into areas that you don’t understand. Please read through the following:

1. Pull Your Credit Report

Let’s assume that you used www.AnnualCreditReport.com to pull all 3 reports, from Experian, TransUnion and Equifax. These 3 reports are free to all consumers, once per year, by federal law. These reports will have all you need to know to get an understanding of your credit profile. You can also choose to sign up for services, such as CreditKarma and CreditSesame, which offer monitoring services. These will also give you basic credit reports that are mostly up-to-date (CreditKarma refreshes every 7 days).

These services will provide you with plenty of information, in case you’ve already used your one AnnualCreditReport for the year. All of these reports are consumer credit reports, which means that they’re not exactly rocket science, yet they’re not made for children to understand either. With all 3 reports you can get a much better picture of what’s going on with your credit. While it’s nice to see one report, it doesn’t show you what might be going on in another. For instance, Equifax could be showing an account that’s negatively affecting your credit score, while TransUnion may not be reporting this same account. With all 3 reports you can get a much better understanding of your credit profile.

2. Your Personal Information

In this section you will notice all of your identifying information, including your name, past and present addresses, drivers license numbers, phone numbers, employers, etc. This is where you need to start checking for any mistakes. Many times you may notice that there will be variations of your name, or even misspellings. Be sure to also check the accuracy of your social security number. Accuracy is extremely important when viewing your credit report(s). If your personal information is not accurate, something could be wrong.

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Identity theft runs rampant in the United States, so be careful to look at everything on the report, including past addresses and phone numbers, which could be the first signs of identity theft. Past employers should also be checked to ensure there’s nothing strange going on here, especially for those who are applying for new jobs. If the employer checks your credit, they may ask you a question about an employer you aren’t familiar with, because you had never worked for them.

3. Accounts/Credit Summary

Any open or closed accounts will appear in this section, which is the most important section for any creditor, as they use this information to make decisions about your creditworthiness.

Your accounts could be credit cards, auto loans, mortgages or even collections such as unpaid cable bills. This could also list other negative items such as bankruptcies, tax liens, etc. Look this area over carefully to ensure that these accounts are yours.

Revolving accounts are usually referencing credit card accounts, which can be borrowed against and paid back over and over (hence ‘revolving’). You will see total accounts, balances, whether they’re open or closed and even inquiries.

Inquiries are simply hard pulls where a creditor has checked your credit report/score. These DO affect your credit score and usually stick around for 2 years, which is why you shouldn’t go around applying for anything and everything that allows you credit. In case you were wondering, Soft pulls/inquiries will not affect your score. These are usually done by banks or credit card companies who send you ‘pre-approved’ promotions in the mail.

You may even see Account History for each account that you have, depending on where you pull your credit report. This will show the history of each account, which can be useful for most people.

You’ll see things such as:

The Creditor’s name: simply the name of the company that has reported the account and the information you’re seeing.
The Account Number: this is the number they use to associate the account in their system with your name. What you see listed may not be the entire number for privacy purposes.
Type of Account: this could be a revolving account, mortgage, student loan or even collection.
Payment: this will show the minimum payment expected of you each month.
Date Opened: this is the date that the account was opened. For instance, if you were approved for a Credit Card, the account was opened that day.
Date Reported: the date reported is the last date in which the company reported the information to that CRA (Credit Reporting Agency/bureau).
Balance: this is where the balance of the account is listed. It may differ from what you know of since the date reported may be a bit more behind than the last payment you made.
Payment Status: this could include anything from the account listed as current or a charge-off. If it’s past due it will appear here as well.
Payment History: this should show the entire payment history of the account, as far as what the company has reported, since the day it was first reported.
Past Due: if your account is past due it will most likely be listed here.

There could be other items not listed, but they should be pretty straight forward. If they’re not, simply ask in the comments section below and I’ll try to explain it to you.

Public Records: in this section you could see some information listed if you’ve ever filed bankruptcy, had a foreclosure or owe child support or if you have a tax lien. The information listed here will be straight from court records, which includes state and federal.

Bankruptcies could be listed on your account (as public record) for 7-10 years, depending on the type of BK it was.

CHAPTER 13 Bankruptcy stays on your report for 7 years from the date it was filed. Chapter 13’s require the person to pay back a portion of their debts.

CHAPTER 7 Bankruptcy stays on your report for 10 years from the date it was filed. Chapter 7’s does not require the person to pay back any of the debts, which is a reason why they stay on your credit longer.

TAX LIENS can stay on your credit indefinitely, until they’re paid. Once they’re paid off they can stay on your credit report for up to 7 years.

CHILD SUPPORT judgements will usually stay on your credit report for up to 7 years from the filing date.

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As you can see from the above, it’s always a good thing to keep this section clear of any issues like those items you just read. They can make it extremely difficult to get credit for anything while listed on your credit report.

Putting it All Together

Credit Reports can be understood pretty easily after you’ve gone over them a few times, but some people may have a lot of information that they either a) do not understand or b) does not belong to them.

If you feel that there are items on your report that do not belong to you, or even information that is listed in error (this could be names, addresses, etc.), be sure to contact the Credit Reporting Agency. You should also take a look at this article on removing items from your credit report.

Remember that Public Records and Accounts that are reported negatively can cause serious problems for your credit health, so you need to be sure to take care of all of your financials and be sure to monitor all activity going on with your credit. Don’t become a victim of identity theft!