How Do I Read My Credit Report?

How to improve credit score

Nicolette Norris

January 17, 2023

More than just looking at your credit score, it is important to know the factors that affect your credit score. This all comes from your credit report.

This is a key step to understanding your overall financial situation and where you stand in the eyes of lenders and other parties for financial decisions related to you.

It can seem challenging to read through the details of your credit report, but understanding each of the factors that are included in your report will make the process simple.

It is recommended that you check your credit report at least once a year to check for any errors that could occur, and you can request a free copy of your credit report every year from Annual Credit Report.

Your credit report can be seen through the lens of the three major credit bureaus: Experian, Equifax, and TransUnion. 

There could be slight differences between the three different credit bureaus, but all should contain accurate and updated information in the five following sections: personal information, employer history, credit history, public records, and credit inquiries.

See below to understand the common errors that you should look out for in each respective section.

Personal information

This is inclusive of your name and any former names or aliases that you have used, your social security number, and your date of birth. All current and previous addresses and your basic contact information should also be accurate in this section.

You will want to look out for any information that does not pertain to you in this section. Former spouses, dependents, or strangers with the same name could be mistakes that appear, but mistakes that you need to correct immediately.

Furthermore, if your name is spelled incorrectly (including minor errors like an incorrect middle initial), your social security number is off, or incorrect addresses and phone numbers appear, these are all indicators that your report could have been confused with someone else’s, which you will want to correct right away.

Also Read: What Is A Good Credit Score?

Employer history

Employer history information is exactly what it sounds like: a record of your current and previous employers. This can also appear in the personal information section of your credit report, depending on the bureau reporting.

While your employment history is not a factor that affects your credit score, you will still want to verify that the information presented is correct. If you see company names or employers that you have never worked for, then it can be an indication that your report is being confused with another person’s, which means that you will want to correct this information.

Credit history

Your credit history is, as you would imagine, the most important portion of your credit report, as it affects your credit score directly. It is also the largest section that you will find.

FICO scores are divided into the following sections: payment history amounts owed, length of credit history, new credit, and credit mix.

Your payment history and the amount that you owe make up the largest portion of your credit score (totaling 65%), which means that you will want to stay on top of making timely payments and lowering the balances of your credit sources.

FICO score calculation

Within the credit history portion of your report, you’ll find the following items:

  • Your payment history, which will reflect whether the minimum payment was made on time or late.
  • Closed and current accounts from the last seven to ten years, including any accounts that you were attached to or listed as an authorized user.
  • The current balance of all of your accounts.
  • Your creditors and lenders, listed by name, although individual purchases from a credit card, for instance, will not be listed here.
  • Your current credit limits and loan amounts.
  • Account opening and closing dates.
  • Account status, whether the account is still open, has been paid off, transferred, or foreclosed.

Public records

Any public records that are related to debt will appear in this section of your report. This includes any bankruptcies, repossessions, and foreclosures. Such records remain on your report for seven years, but Chapter 7 bankruptcies remain on your report for ten years.

This portion of your credit report will not include lawsuits, divorces, arrests, or unrelated infractions with the law (e.g. speeding tickets). Since 2018, the three major credit bureaus have not factored tax liens into your credit score or report. If you happen to find one, however, you should take the time to dispute the error.

If there are public records on your credit report, it can prove helpful to present an explanation to lenders regarding why this negative item appears on your report.

Also read: What Are Credit Reporting Agencies?

Credit inquiries

Credit inquiries are referring to records that appear on your credit report anytime someone has accessed your information, as well as the date that the instance took place.

Soft inquiries take place when you check your own credit report, and also when your current creditors check your report to send you pre-approved credit options.

Hard inquiries, on the other hand, are a little more serious and take place when you apply for loans, mortgages, new credit cards, or credit limit increases. It is also considered a hard inquiry when a collections agency is trying to find you.

Hard inquiries usually decrease your credit score by a few points each time, and a record of each inquiry, it can make your credit profile look unattractive to lenders. Soft inquiries, however, do not affect your credit score at all.

Furthermore, if you notice a hard inquiry on your account that you did not request, it could be a sign of identity theft, and it is something that you will want to look into. Hard inquiries should be removed from your credit report after a couple of years.

Bottom line

The purpose of regularly checking your credit report is to ensure that it is accurate and does not reflect errors of any kind. The moment you notice something unfamiliar, it’s best to dispute it right away. This will be helpful to prevent any potential fraud, identity theft, and to make sure that your credit score is as accurate as possible.

If you’re finding it challenging to take the time to examine your credit report in detail, credit repair services like Cool Credit take care of the hard work for you by auditing your credit report, disputing any and all negative remarks, and working to improve your credit for a low monthly fee. Take charge of your credit today with Cool Credit.

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