So you’ve taken the first step towards rebuilding your credit: getting your credit report. Now the question is, how do you read it? There are numbers and abbreviations everywhere, and some of the items on it may seem pretty old. How can you tell what items are important, still outstanding, or what people will be looking for when you apply for loans, rentals, credit cards, and more?
First, there are three major credit-reporting agencies in the United States: Experian, TransUnion and Equifax. Everyone is entitled to a free copy of their three credit reports — one from each of the credit reporting agencies — every 12 months under federal law. The easiest report to read will come straight from the credit bureau, don’t bother getting one from a bank, these lender’s reports are designed for lenders, not consumers.
A credit report is divided into four sections: identifying information, credit history, public records and inquiries.
The information you should see is your personal information. Look at it closely to make sure it’s accurate. There may be a couple of spelling differences, but they are nothing to be worried about. It just reflects how the information was entered in by the creditor. Other information might include your current and previous addresses, your date of birth, telephone numbers, driver license numbers, your employer and your spouse’s name.
The next section is your credit history. It lists each account, including 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 what kind of credit was offered (credit card, car loan, mortgage, etc), any other family, spouses, or people on the account with you, the total amount of the credit and how much is still owed, the status of the account, and how well you’ve been paying on it.
The next area is public records. This is not generally a good sign on a credit report. The report lists only financial-related data such as bankruptcies, judgments and tax liens, all of which can trash your credit. Criminal records are not listed on a credit report.
The final section is inquiries. This shows who asked for your credit report, when they asked, and why. There are two kinds of inquiries, hard inquiries and soft inquiries. Hard inquiries are pulled any time you fill out an application for credit. Too many of these start to reflect on your score. Soft inquiries are pre-screened offers which only show up on your consumer report and don’t have an effect on the score.
An educated consumer is always one-up on the competition!