How to Read a Credit Report?
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Updated date : 16 May 2019
The name of the credit report itself explains its meaning, according to which, a credit report contains a detailed record of one's credit history. A credit report, most of the times, is compiled by any of the three most trusted credit rating bureaus – TransUnion, Experian, or Equifax.
In other words, a credit report carries the information of wealth about the financial history of an individual. So, if one has a loan and/or credit accounts, the details of those accounts are included in the credit report. Therefore, it is necessary to review the credit report at least once a year. However, to read and understand a credit report can be confusing, especially when one is reading this report for the first time. In such a situation one may ask ‘how to read credit report?' To get the answer to this question here, we are providing step by step procedure to read a credit report and understand the terms involved in it.
Before understanding the breakdown of the information included in the credit report, it is essential to know that every credit rating bureau provides a free credit report at least once every 12 months. This means an individual can get one free credit report every year from any of these top credit bureaus.
Steps to Read Credit Report
Step 1: Get the Copy of Credit Report from Equifax, TransUnion, or Experian
An individual can get one free copy of his/her credit report every year through one of three top credit reporting bureaus, which are – TransUnion, Equifax, or Experian. However, to get more copies one has to pay.
Step 2: Verify Personal Contact Information
The next step that one should do after getting the credit report is verifying his/her personal information. The common information present under this section are:
- Date of Birth
- Phone Number, etc.
It is common to have variations in the personal information, which can be a misspelling of the name of the person or his/her old address. However, having an old address or having some different version of the name do not hurt the credit history of a person until all the information is belonging to that person only. Therefore, checking this section is essential to identify self and not some other person.
Step 3: Read the Credit History Section
This section of the credit report has a summary of the information that is related to different types of accounts that one has. Generally, the total number accounts that one has along with the balance in these accounts is mentioned in this section. It also contains a number of delinquent and current accounts. The account types included in this section are:
- Revolving Accounts: The history of credit cards and the lines of credit that one owns.
- Real Estate Accounts: This section of the credit history contains the information of any mortgages that one has.
- Installment Accounts: Any loans that are not related to real estates, such as loans taken for education or car come under this category.
- Collection Accounts: The account or accounts of an individual that are sent for collections comes under this category.
- Other Accounts: Any miscellaneous accounts that do not come under any other categories.
This section also contains the history of accounts that one has opened and closed and the total number of inquiries that have been made against the credit of the person in the past two years.
Step 4: Review Each Account’s ‘Credit History’ Section
This section can also be called as ‘Account History’ section wherein a bulk of information related to the account of an individual are mentioned. Even though this section, most of the times, is very detailed, but it is recommended to read through all the information mentioned here. This is to make sure that the information that is mentioned here is correct. Some of the important pieces of information that are contained in this part are:
- Name of the Creditor: This contains the name of the institution that is reporting the details or information of an individual.
- Account Type: The type of account that can be an education loan, revolving account, auto loan account, etc.
- Account Number: The account number that is associated with the account. This can be shortened or scrambled for the purpose of privacy.
- Responsibility: This section mentions the authorized or responsible users of this account which can be – individual, joint, etc.
- Date Opened: The year and month in which the account was opened.
- Monthly Payments: It is the minimum amount that one has to pay on the account every month.
- Date Reported: It is the last date when the creditor has last updated the information of the account with the credit bureau.
- Loan Amount or Credit Limit
- Balance: The amount in the account at the time the data reporting.
- High Credit or High Balance: It is the highest amount that is charged on the credit card. For the installments of the loan, high credit is considered as the loan amount.
- Remarks: The remarks are the comments given by the creditor about the account.
- Past Due: The amount that is past due at the time of data reporting.
- Status of the Payment: This part contains the status of the account, which can be current, charge-off, past-due. However, if the account of an individual is current, then this section may contain information about past non-payments.
- History of Payment: This part contains the status of monthly payment since the time the account was established.
Step 5: Check the ‘Public Records’ Section
This section contains information related to bankruptcies of an individual, tax liens, judgments, country and state records, overdue child support, etc. According to the type of account one owns, the public record can be a part of his/her credit report between 7 to 10 years. Basically, this section contains financial blunders, but not the convictions or criminal reports.
Step 6: Verify the ‘Credit Inquiries’
The credit inquiries contain the list of all the parties that have accessed the credit report of an individual in the past two years. Although the credit report may contain many credit inquiries, not all of these inquiries appear creditors' and lenders' versions.
- The inquiries that are considered ‘hard’ are shown to the lenders. Basically, a ‘hard’ inquiry is one that is made by the lender to check the credit report of an individual for approving his/her credit application.
- On the other hand, the version of ‘credit inquiries’ of an individual contains the list of inquiries that are made by the lenders for promotional purposes.
Knowing the steps to read a credit report helps an individual to improve his/her credit score. Moreover, an individual is recommended to read his/her credit report on a regular basis for keeping an eye on possible fraud and identity thefts.