It's important to review your credit periodically. But your credit report contains a lot of information, and it can be confusing to navigate. Here's how to decode and understand your report.
For a number of reasons, experts recommend checking your credit report once a year. Because your credit is a collection of your debt history, it can affect your loan interest rates and ability to open financial accounts. An annual review helps ensure your report is up-to-date and accurate. Also, if you're a victim of identity theft, your report might contain errors. Overall, reviewing your credit keeps you aware of your financial situation.
You might see a handful of sections on your report, but most of the information is grouped into four main categories: personal information, public record information, creditor information and credit inquiries.
This is pretty self-explanatory, but this section generally includes:
If you have any open legal issues related to your financial situation, they'll be included in this section. These records might be:
CreditCards.com adds that if you're looking at a TransUnion report, you'll also see an estimated date of removal for each item.
Here's the meat of your report. All of your existing lines of credit are included in this section. If you've had any credit turned over to a collection agency, that'll be included, too.
Among some basic information, each account section tells you:
Generally, your adverse accounts and good accounts will be split:
These are the accounts that hurt your credit. If you have an account in this section, you might have made late payments, the balance might be outstanding, or the account may have been sent to a collection agency. According to CreditCards.com:
Even if you are current on your in your payments for a credit account, it may still be included in this section of your credit report—if you had ever missed or were late on a payment.
The site explains that all three credit bureaus (Experian, TransUnion and Equifax) allow you to dispute any of the accounts in this section. If the accounts are indeed adverse, they'll be removed from your report after seven years. Again, if you're looking at a TransUnion report, the date of removal is included.
These accounts have been paid in full and on time.
You did pay, and that's great! But that doesn't change what already happened. At one point, your debt was charged off, and your credit report is accurate in reflecting that. It'll show the charged-off debt for seven years from the date it first went into continuous delinquency.
This section includes individuals or businesses who have pulled and reviewed your credit report. It might include a bank at which you opened an account, for example. Or a mortgage lender, if you're applying for a home loan. According to College Answer, there are two types of inquiries.
Banking site Bankitis offers a handy breakdown of the credit report codes. Here are some different status codes you might see, and what they mean:
MyFICO.com says your credit score is based on five cateogries. Here's a breakdown.
If you think your report contains an error, you can file a dispute. All three of the major credit reporting agencies allow you to file disputes online. You can also mail in your dispute. The Federal Trade Commission offers sample dispute letters. According to Bankrate, TransUnion and Equifax offer a mail-in dispute form, and Experian offers this on the last page of the consumer's Experian credit report.
If it's your first time reading a report, or if your report includes a lot of activity—especially adverse activity—a credit report can be confusing. Don't let that deter you from keeping up with your credit. Once you learn how to read it, it's pretty simple.
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