The importance of your credit reports cannot be overstated given their wide ranging influence over your financial life. Credit reports, however, are not always the easiest documents to navigate, especially if you’re trying to read your credit report for the first time.
The combination of numbers, codes, acronyms, abbreviations and terms can become overwhelming as you read your credit report. Most credit files contain multiple categories of information and unless you fully understand the content you’re not getting the most out of your efforts to stay on top of your reports.
Here are five important parts of credit reports to be aware of when you read your credit report:
Personal information
Not only do credit reports contain information about your accounts and payment habits, but they also contain a great deal of personal identifying information.
Items found in the personal information section of your credit reports include your full name, aliases, former names, current and previous addresses, Social Security number and your date of birth. This type of personal information is often referred to as “cosmetic” data because it has no impact on a consumer’s credit scores.
When you read your credit reports and review them you should take a long, hard look at the personal information section to ensure its accuracy. While incorrect information in this section won’t prevent you from getting a loan, it could indicate that someone is trying to obtain credit in your name.
If you find any errors in the personal information section when you read your credit report, you have the right to contact the credit reporting agencies and ask for the incorrect information to be updated or removed.
Read your credit report for account history
The “account history” or “credit history” section of a credit report typically contains the majority of the information about a consumer’s present and past liabilities. The information in this section is formally referred to as “trade” by those in the credit reporting industry.
The account history section is sometimes divided into subsections such as “installment accounts” and “revolving accounts.”
Information in this section plays a considerable part in calculating your credit scores so it is important to pay close attention to the data being reported within this section when you read your credit report.
Your accounts typically include information about your relationship with the lender such as whether you’re the primary borrower or just a co-obligor.
Account numbers are commonly listed but are always truncated or otherwise masked to protect the consumer from fraud. Each account will clearly identify the lender and will also include your payment history on the account as well as any current or past due balance information.
Third-party collections
Many credit reports will maintain collection agency accounts, if any, in a separate section apart from your account history. Anything included in this section indicates that you’ve defaulted on some sort of obligation and the creditor or service provider has enlisted the services of a debt collector to attempt to convince you to pay up.
It goes without saying that information in the collection’s section can have a negative impact on your credit scores, so pay close attention to it when you read your credit report.
Similar to the items listed in the account history section of your credit reports, the collection’s section can contain information about your payment history, account status, account types, high balances, past due amounts and other account elements. Some credit reports include the purge date for collection accounts as well. The purge date is the date that the collection will be removed from your credit reports.
Because of its importance to your credit scores it’s very important when you read your credit reports to ensure the information in this section of your credit reports is void of any errors.
If you find an error, such as a collection account that does not belong to you, then you have the right to dispute the account with the credit bureaus and even with the collection agency itself. If the item is deemed to be inaccurate then it must be removed.
Public records
In the “public records” section of your credit report you can find information about some of the public records that are filed in your name. Not all public records find their way onto consumer credit reports due to the fact that many of them do not indicate some sort of non-performance on a financial liability.
There are only three types of public records that are ever included on credit reports: bankruptcies, tax liens, and judgments.
When it comes to public records, none of them are positive. Depending on what else is on your credit reports the presence of public records can have a negative impact on your credit scores. To make matters worse, a public record can remain on a credit report for seven to 10 years, depending on the item.
It’s worth noting that public records find their way onto credit reports much differently than other types of credit report items. The credit reporting agencies Equifax, Trans Union, and Experian proactively seek out public records data using public record vendors and electronic access to court records and then place it on consumer credit reports.
Credit inquiries
Any time a copy of one of your credit reports is accessed a record of the credit inquiry is placed on your credit report. This gives you a comprehensive list of any access into your credit reports and allows you to identify potential fraud when you read your credit report. Inquiries will remain on your credit reports for no longer than 24 months.
There are two types of inquiries that appear on credit reports: hard and soft. Hard inquiries generally occur when a lender pulls a copy of your credit report(s) during a loan application. Soft inquiries generally occur when you request a copy of your own credit for review purposes and read your credit report. Hard inquiries can have a negative impact on your credit scores while soft inquiries cannot.
You will likely have considerably more soft inquiries on your credit reports than hard inquiries. Whenever a credit card issuer buys your name and address from a credit bureau for the purposes of sending you credit card solicitations in the mail a soft inquiry, often called a “promotional inquiry,” is placed on your credit reports. That can happen dozens of times each year, which is the cause of the large number of soft inquiries on credit reports.
