How to Read Your Credit Report
Your credit reports play an essential role in your financial life. They’re the basis for your credit scores, which can affect your ability to qualify for new loans or credit cards. Even if you don’t plan on taking out a loan or opening a credit card, your credit reports can be important when you apply for a job or want to rent an apartment.
If you want to be in control of your financial future, you need to learn how to read your credit reports. Once you do, regularly checking your reports and disputing errors can be an important part of your financial health regimen.
How to get your credit report
There are three major consumer credit bureaus in the U.S.:TransUnion, Experian and Equifax. The bureaus collect and organize the same types of information about consumers, though they’re competitors, and the credit report each one generates may differ from the others.
You can request a free copy of your credit report once every 12 months from each bureau at AnnualCreditReport.com.
You may be eligible for additional free copies from the credit bureaus when:
- You apply for a credit account, insurance or employment and don’t get approved, or get a worse offer, due to your credit
- You place a fraud alert on your credit report
- You’re unemployed and plan to apply for a job within 60 days
- You’re receiving public welfare assistance
Some states may also give residents the right to request additional free copies from the credit bureaus throughout the year or after specific types of incidents.
These reports generally won’t include your credit scores, but there are free ways to check your credit scores as well.
What you can expect to find on your credit report
Although your credit report should have similar information no matter where you get it, credit report providers may display your information in different ways to try to make it easier to understand.
Generally, your credit report will be broken up into several distinct sections, with each one highlighting a certain type of information.
- Personal information. The top of your credit report is usually reserved for your identifying and personal information, such as your name, Social Security number and employment history. This section won’t influence your credit scores, but it can still be important, and you want to make sure it’s correct. If you see a different name or an address you don’t recognize, that could be an indication that someone tried to fraudulently apply for credit using your identity.
- Personal statement. Consumers can add a short statement to their credit report if they tried to dispute information in their report, but it wasn’t changed or removed.
- Your accounts. The accounts section will list all the accounts that have been reported to the credit bureau, such as credit cards and loans. Each account (also called a tradeline) can have various details, such as the opening date, current balance and whether you’ve made payments on time.
- Closed accounts. If you close an account or pay off a loan, the account may remain on your credit reports for up to 10 years. Your closed accounts may be separated from your open accounts, but the on-time or late payments associated with the accounts can still affect your credit scores.
- Collections. If you stopped making payments and the creditor sent your account to collections, the collections account may appear in a separate part of your credit report. When this happens, the original account should be closed in the accounts section. You might also find collections for bills that never appeared in the accounts section, such as utility bills or cellphone payments.
- Hard inquiries. A hard inquiry is a record of your credit being checked before a creditor makes a lending decision. These can appear on your credit report for up to two years and affect some credit scores for up to a year. Often, the hard inquiries sections will be different on each of your credit reports because creditors may only check one of your credit reports rather than two (or all three) when considering your application.
- Soft inquiries. Soft inquiries will appear only on your copy of your credit report — no one else gets to see them, and they don’t affect your credit scores. They can be the result of you checking your own credit, or someone else checking your credit for a non-lending reason, such as one of your current creditors keeping an eye on you.
- Public records. The public records section includes information that the bureau collects from the court systems. If you’ve declared bankruptcy in the last 10 years, it may appear here.
Correcting common errors
Most credit reports are an accurate representation of the person’s credit history. However, millions of people may have errors on their credit reports, and some of these errors could be affecting their scores. Correcting erroneous negative information can help improve your credit scores, which can save you money and help you qualify for more financial products.
The most common errors may include:
- An account that you didn’t open appearing on your credit report
- An account that remains on your credit report longer than it should
- An incorrect balance or credit limit on one of your accounts
- An incorrect negative mark, such as a late payment, on one of your accounts
- An error that was corrected but is once again showing up
- An account that appears multiple times with different creditors listed (especially with delinquent accounts or collections)
If you find an error on your credit report, you can file a free dispute with the credit bureau and ask the bureau to correct the information. That might mean removing an account that shouldn’t be on your report, or updating your account with the correct balance or payment history.
Once you file a dispute, the credit bureau must investigate your claim, consider the proof you’ve submitted with your dispute (you can attach or mail in supporting documents), contact the company that sent the information to the bureau and then verify, correct or delete the information on your report within 30 to 45 days.
You could also hire a credit repair organization to analyze your credit reports for errors and help you file disputes.
Make checking your credit a habit
Regularly checking your credit reports, or using credit monitoring services to keep track of your three credit reports, should be part of your personal finance routine. You’ll be able to track what’s helping or hurting your credit, and you can quickly take action if an error shows up on your report or someone tries to use your identity to fraudulently apply for credit. You can’t always stop errors from showing up on your report, but if you check often enough, you can prevent them from holding you back.