How to Read a Credit Report | The importance of Fully Understanding Your Credit Reports

You can get your credit report for free

Before you learn how to read a credit report, you will need to obtain a copy of it.

Under the Fair Credit Reporting Act (FCRA), everyone is entitled to one free credit report each year. Before you request your free credit report and contact a credit repair service, we’ll teach you all you need to know about understanding credit reports.

First, you will need to get your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion). It’s important to request all three credit reports, since there may be inaccuracies on one report that may not appear on the others. That’s why you may have an Experian score of 605 and a TransUnion score of 660. Having even one low credit score will drastically affect your ability to get approved for loans and credit, as well as your interest rates.

The pertinent information about you: make sure its correct

Basic information on your reports includes your name, social security number, phone numbers, date of birth, current and previous addresses, and your current employer. If you are married, have been married in the past, or have undergone a legal name change; the report will list all the other names you’ve been known by.

Each credit report will list your bill-paying practices, whether or not you pay those bills on time, what types of accounts you have, how many accounts you have, and your levels of debt. The reports will also list public record information like bankruptcies, criminal charges, and past due payments.

Credit inquiries

Your report also includes who’s looked at your credit file (a.k.a. credit inquiries). All inquiries are labeled as “hard” or “soft.” Hard inquiries are made by prospective lenders when you apply for loans or lines of credit.

A large number of hard inquiries within a short period of time will affect your credit score. Soft inquiries are made by you when you check your credit scores and by credit card companies prior to sending you pre-approved offers in the mail. A soft inquiry will have no effect on your credit score.

Because there are three different credit bureaus, they all use different layouts when displaying information. Some are straightforward and easier to look at than others. Some have codes that you will have to learn.

Here are the main things that will be displayed on your credit reports

As mentioned above your pertinent information is usually on the cover page. And they usually have a credit summary in the very beginning as well.

Usually the first page or first few pages will have your adverse, negative items displayed about you. Will show you the creditor, the original balance, your credit limit, what is past due, the responsibility of the account, meaning whose name the account is in, the date opened and date closed, and the status of why it is negative.

The most common negative statuses are

  • Collection account

  • ¬†60 days past due (or how many days you are past due)

  • ¬†Discharged through chapter 13 bankruptcy (or 7, 11, 12 bankruptcy)

  • Charged-off

Make sure when reading the negative accounts, you look for the following “Estimated date that this item will be removed:” This is to tell you when the negative account will fall off naturally. This is obviously good information to know.

The next few pages of your credit report will say satisfactory accounts or accounts in good standing

The most common positive statuses for accounts that are in good standing are

  • Pays as agreed

  • Pays on time

  • Account in good standing

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