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| How
To Read & Understand Your Credit Report |
First off, there are three major credit reporting agencies in the United States:
Experian, TransUnion and Equifax.
Reviewing your credit report from just
one
of these agencies is a useless endeavor. You need to look at all three. People
tend to pull one and think everything is the same on all of them. That's not
normally the case. The reports will have different information because
it's a voluntary system, and creditors subscribe to whichever agency they want
-- if any at all.
It's recommended that you order the report directly from the credit bureau instead
of asking a buddy who works at a bank to pull one for you. Those credit reports
are
written
for
people
who
work
in the credit industry. The one you get from the credit bureau is designed for
consumers. The information is the same, but it's much more consumer friendly.
A credit report is basically divided into four sections: identifying information,
credit history, public records, and inquiries. Identifying information is just
that -- information to identify you. Look at it closely to make sure it's accurate.
It's not unusual for there to be two or three spellings of your
name usually because someone
reported the information that way.
Other information might include your current and previous addresses, your date
of birth, telephone numbers, driver's license numbers, your employer, and your
spouse's name.
The next section is your credit history. Sometimes the individual
accounts are called trade lines. Each account will include the name of the creditor
and the account number, which may be scrambled for security purposes. You may
have more than one account from a creditor. Many creditors have more than one
kind of account, or if you move, they transfer your account to a new location
and assign a new number. The entry will also include:
• When you opened the account
• The kind of credit (installment, i.e. car loan, or revolving,
i.e. credit card)
• Whether the account is in your name alone or with another person
• Total amount of the loan, high credit limit, or highest balance on the
card
• How much you still owe
• Fixed monthly payments or minimum monthly amount
• Status of the account (open, inactive, closed, paid, etc.)
• How well you've paid the account
The next section is the part you want to be absolutely blank. The public records
section is never a good story. If you have a public
record on there, you've had a problem. It doesn't list arrests and criminal
activities but does include financial related data, such as bankruptcies, judgments,
and tax liens. Those are the monsters that will trash your credit faster than
anything
else.
The final section is the inquiries. That's a list of everyone who asked to see
your credit report. Any time anyone gets into the report, it'll post an
inquiry. If you call the credit bureau and ask for
a copy, it will be on there. You may have heard that a large number
of inquiries can have a negative impact on your credit score, but you're probably
OK. The vast majority of inquiries are ignored by the FICO scoring models. For
instance, the FICO scores have at least a 30 day buffer period where auto and
mortgage inquiries
are initially bypassed and not counted. It also counts two or more "hard" inquiries
in the same 14-day period as just one inquiry. "You could have 30 in two
weeks and it only counts as one.
If you find a mistake on your credit report -- an account that isn't yours or
a disputed amount -- you'll need to fill out the form that comes with the report,
or follow the instructions on the explanatory sheet. The process takes time because
the creditors have 30 days to respond to a charge of a discrepancy. As long as
a charge is in dispute, that dispute will show up on your report. Long-time lenders
say it's common for reports to have errors. Some estimate that as many as 80
percent of all credit reports have some kind of misinformation.
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