Have you ever read a credit report and have been confused by the jargon in it?
Maybe you wanted to apply for credit and you had to read a credit report to make sure your credit qualifies?
Your credit score is what lenders used to judge your creditworthiness, and having a good to excellent credit score means you get access to better loan opportunities, including lower interest rates and higher credit limits.
To maintain a good credit score, it’s good to how your credit score is calculated and what factors impact your credit score both positively and negatively.
The best way to do that is to learn how to read a credit report.
When you read a credit report, you’ll be able to spot incorrect information on your credit report and prevent/reduce the danger being done to your credit score.
It is not uncommon for errors to show up on your credit report, and while some errors might have little impact on your credit report, others will reduce your credit score significantly if you don’t get them corrected.
And you can’t correct any errors on your credit report without knowing how to read a credit report.
Also, when you know how to read a credit report, you’ll be able to spot signs of fraud and identity theft.
So just how do you go about learning how to read a credit report? That’s what we’ll be exploring today.
We’ll be looking at:
- How to read a credit report
- Finding errors when you read a credit report
- Where to get your credit report
- How to dispute the errors in a credit report.
- How To Read A Credit Report
Are they any benefits to learning how to read a credit report?
Maybe you want to boost your credit score, but you can’t even understand the financial jargon in your credit report.
Before you can know how to read a credit report, you need to know the information that goes into your credit report and its impact on your credit report.
The information that goes into your credit report includes.
Personal Information
This section of your credit report is used to establish your identity and to show that the credit report does indeed belong to you.
The personal information that is collected includes:
- Your name. Both past and present names and any aliases you have.
- Your date of birth
- Your social security number
- Phone numbers and email addresses
- All past and present addresses
One benefit of knowing how to read a credit report is the ability to spot errors and other problems like fraud on time
Employment history
This is the record of all past and present employers.
This section is also used to verify your identity.
Your employment history would sometimes show up in the “Personal information” section.
Watch closely for wrong employment information when you read a credit report.
Credit history
This is all the information concerning all your past and present credit accounts. While the previous sections are only used to verify your identity, this section is used to calculate your credit score. When you read a credit report, pay special attention to this section, especially when you are concerned with having and maintaining a good credit score. The information that goes into this section includes;
Payment history
This includes both on-time and missed payments.
Past-due amounts will also be recorded alongside the number of days. E.g. 30, 60, 150, 180 days later.
Account Status
This includes open, closed, transferred, refinanced, and foreclosed accounts.
Names of all past and present creditors; I.e. the names of the creditors and the dates
Credit limits
The credit limit for your revolving accounts and the loan amount for fixed installment accounts will also appear in your credit report.
Open and close dates of the accounts
Credit utilization
When you read a credit report, watch out for information that will remain in your credit report for a period, even after you’ve paid off the loan. Examples include missed and late payments, delinquent accounts, and charged-off accounts, etc.
Credit Inquiries
A credit inquiry shows the last time someone accessed your credit report and the identity of the person.
This is another spot to observe when you read a credit report, as erroneous credit inquiries can be a sign of identity theft.
The two types of credit inquiries include..
Soft Inquiries
These happen because of your or your current creditor checking your account information. It can also happen because of other companies planning to send you offers.
Hard inquiries
These usually occur because lenders check your credit information after you’ve applied for new loans, mortgages, credit limit increases, and new credit cards. Hard inquiries can also show up on your credit report because of a collection agency trying to get to you. Hard inquiries have more impact on your credit score.
Public records
Some types of public records will show up on your credit report, especially those related to debt. Some public records can affect your credit score, so pay close attention to errors when you read a credit report.
Examples of public records include:
- Foreclosures
- Repossession
- Bankruptcies
- Collections
When you’ve missed payments on a loan by up to 180 days, the creditor might decide to turn over the account to a collections agency.
If the account is turned over to a collections agency, it will immediately reflect in your credit report.
Please note that accounts in collections have very serious negative effects on your credit score.
Seeing as all these pieces of information show up in your credit report, it is quite easy to have a couple of places filled with errors and you won’t be able to spot them if you don’t take the time to read a credit report properly
Types of Errors You Might Find When You Read A Credit Report
While it doesn’t always happen, errors can show up on credit reports, and one consequence of knowing how to read a credit report is being able to spot errors on your credit report.
Once you read a credit report and spot errors, you can take steps to remove the errors and the damage caused.
Here are some common errors to watch for when you read a credit report.
Personal Information
When you read a credit report, be on the lookout for any personal information that doesn’t belong to you.
This can be a wrong/misspelled name, wrong social security number, wrong address, etc.
Employment History
Your employment history aims to help verify your identity, and that means it won’t affect your credit score.
However, having errors in your employment history like wrong company names and wrong employers might mean your credit report was mixed up with someone else’s.
Or it might represent signs of fraud and identity theft.
When you read a credit report, check for wrong employment information thoroughly.
Credit history
When you read a credit report, it is important to spend a chunk of time carefully looking for errors in this part of your credit report.
Remember that your credit history is the most important factor used in calculating your credit score, and any errors in this section would have the most impact on your credit score.
Public Record
Any public record that appears on your credit report must have your name, address, date of birth, etc.
It must also be backed by a courthouse visit at least every 90 days.
When you read a credit report, make sure the personal information included on the public records like address, date of birth, etc. are accurate, I.e. they are yours.
Also, not all public records should show on your credit report.
Examples include:
- Tax liens
- Your rent
- Speeding tickets and other civil judgments
When you read a credit report and you find tax liens and other public records that shouldn’t be on your credit report, dispute the errors with the credit bureaus.
Credit inquiries
While soft inquiries are not a cause for concern, the opposite is true for hard inquiries.
Hard inquiries usually stay on your credit report for up to 2 years.
For that reason, you must check all inquiries on your credit report and make sure that they are all accurate.
While hard inquiries are usually caused by different potential lenders requesting your credit report after a recent loan application, they can also be caused by identity theft.
Plus, check that none of the hard inquiries on your credit report is older than 2 years, or start a dispute and ask that the hard inquiry be removed.
If you don’t read a credit report thoroughly, you might not notice mysterious credit inquiries that have been reducing your score.
Here are a few other warning signs to watch out for when you read a credit report.
- On-time payments wrongly recorded as late payments
- Closed accounts that are wrongly recorded as open
- Open accounts that are wrongly reported as “delinquent” accounts
- Incorrect dates on your account. I.e. opened/closed dates, last payments, and delinquent payments.
- Accounts that have you listed as the owner instead of allowed user
The same accounts are registered multiple times under different lenders.
This sometimes happens with accounts in “collections”
Knowing how to read a credit report helps you spot errors and other problems like identity theft and fraud.
Plus, knowing how to read a credit report will help you keep a good credit score.
Where to Get Your Credit Report
Before you can read a credit report, you must know where to get one.
Also, they are slight differences in the credit reports that you get from each credit bureau.
You can get one free copy of your credit report from the three major credit bureaus each year by making a request online.
Once a year, read a credit report from the three major credit bureaus.
How To Dispute The Errors in A Credit Report
After you read a credit report, you might find errors in the report that are affecting your credit score negatively and you’d need to remove the errors immediately.
We have written a step-by-step guide to removing errors from your credit report through filing a dispute with the credit bureaus.
Gather all necessary information directly related to the errors.
The first step is to gather all documentation that’ll help you prove the errors in your credit report.
Common examples of documents you might need include; personal information, proof that the item in dispute is wrong, etc.
Also, be thorough when you read a credit report so you won’t miss any errors.
File a dispute
After collecting all the information, file a dispute with the credit bureau that made the error on your credit report.
It is good practice to check for errors on your credit reports from the three main credit bureaus and file disputes with any bureau that has made errors on your credit reports.
Contact the credit bureaus regularly to monitor the progress while they work on correcting the errors in your credit report.
Please note that they might ask you for additional information and you must be prepared to provide the information.
Please note that the credit bureaus are required by law to investigate all disputes within 30 days.
However, because of the COVID-19 pandemic, the time frame has been temporarily moved to 45 days.
Conclusion
There are many benefits to knowing how to read a credit report. Some of which include;
Spotting and removing errors from your credit report.
Being able to manage your credit score better, etc.
Now, while it might seem complex, you can learn how to read a credit report if you know the right steps to follow.
And that is what this article aims to do; show you how to read a credit report and we’ve done this by breaking down all the complex areas of a credit report into simple steps.
Now, take this guide and refer to it whenever you encounter something confusing in your credit report.
