How to Read a Credit Report

A credit report is more important than some people believe. While it might not seem like a big deal, ignoring your credit report can be very harmful to your future.

Consumers should check their credit reports throughout the year to make sure all of the information being reported is correct. Credit reports should be free from misspellings, have complete information, and report only what is correct. Mistakes can be made on reports, so pay close attention when reviewing your credit report. The sooner a mistake is corrected, the better!

A person is entitled to one free credit report per year from each of the three credit bureaus – TransUnion, Equifax, and Experian. You can visit www.annualcreditreport.com to get your credit report. The three reports can be pulled all at once, but I recommend pulling one report every four months. For example, pull the TransUnion report in April, the Equifax report in August, and the Experian report in December. Using this strategy gives you a chance to regularly check your reports throughout the year for free. The three bureaus report all the same categories of information.

So, now that you have your credit report, what should you be looking at?

  • Personal Information – Names, addresses, social security numbers, birth dates, and employment are all reported on your credit report. Make sure that all of these are correct. Even a misspelling needs to be corrected. If there is an error in your personal information, it shouldn’t affect your credit score, but it could be a sign of fraud.
  • Inquiries – Make sure you recognize all of the credit inquiries that are reported on your credit report. If something looks unfamiliar, research it to find out if it was reported incorrectly. For example, a car dealership may have pulled your credit. Did you give them permission to do that, or could this be a mistake?
  • Delinquencies – Late payments are a negative influence on your credit score. (They make up 35% of your FICO score!) Your credit score is affected more negatively the later the payment was made. If any late payments appear on your credit report, make sure they are accurate, and if not, call the lender to discuss why it was reported as late.
  • Credit Limits – The closer you are to reaching your credit limit, the worse it is for your credit score. Your credit report will show your credit limit and the balance you are carrying, so make sure to compare these numbers with credit card statements to ensure they are accurately reported.
  • Active or Closed Accounts – Make sure all of your active and closed accounts are reported. If you see an account opened that you did not apply for, this is a huge red flag that needs to be reported. This could be a sign that someone else is using your identity to open accounts!
  • Public Records or Collections – This includes bankruptcies, foreclosures, suits, wage attachments, liens, and judgements. Typically, a person knows if they have any of these situations. However, if something is reported that you do not recognize, take action and find out what it is and if it really should be on your credit report.

Did you find an error on your credit report? Here’s what you should do next…

Account errors can affect your credit score, and a bad credit score could hurt your chances on getting a credit card or loan, or the rate you qualify for. For this reason, it is extremely important to follow through with reporting any errors and making sure it is completely taken care of. In some cases, such as a late payment, you may be able to clear up an error with the creditor. If this isn’t the case, you will need to dispute the error with both the creditor and the reporting credit bureau. Depending on which bureau you are filing a dispute with, you will either need to contact them online or by mail. After about 30 – 45 business days, you should receive the results of the dispute. It’s a good idea to check your credit score soon after to make sure anything that was to be corrected is reported.

With all of the information that gets reported on your credit report, there is always the chance that something could be incorrect. Remember how important having the correct information is on your report, and how false information can hurt you in the future. Staying on top of this is just another step to help you be financially successful in your future!

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