Money Mysteries: How To Read Your Credit Report

Hi Money Masters!

Congratulations, America! The current average credit score for Americans is 673 which is considered “good” credit according to the credit scale. Great news! However, there are many people who do not know how to read a credit report. Let’s start with a little “Credit 101”…

Creditors will provide information to a credit-reporting agency (or bureau) about the type of credit you have with them. There are three major credit-reporting agencies in the United States:

Experian – TransUnion – Equifax

Each individual is able to obtain a free copy of their three credit reports — one from each of the credit reporting agencies — every 12 months under federal law.

Now let’s take a look at a credit report. There is a lot of information on it, from numbers and abbreviations to words you may have never even seen before! Also, not all the information will be the same from agency to agency as creditors report to only the agency or agencies they want.

 

Your credit report is divided into 4 sections: identifying information, credit history, public records and inquiries.

 

Identifying Information

Check over the info- you’ll see your name, social security number, address, phone number, driver’s license no. and spouse information, if applicable.

 

Credit History

This section lists each credit account you have by name and the account number (which may be altered for security purposes). Account information consists of:

• Type of credit (for example: installment, like a mortgage or car loan, or revolving, as in a credit card)

• Name or names of person(s) on account

• Loan amount and balance due

• Any fixed monthly payments or minimum monthly amount

• Account Status (open, inactive, closed, paid, etc.)

• Payment history

 

Public Records

This section contains information regarding any bankruptcies, judgements, or tax liens. These types of items generally have a negative impact on your credit and credit score. However, the length of time an item stays on your report varies.

Bankruptcy: 7-10 years

Tax Lien: 7-10 years

Judgement: updated upon complete payment

 

Inquiries

This is a list of anyone who has asked to see your credit report. There are 2 types of inquiries: soft and hard. Hard inquiries result from a credit application. For example, applying for a mortgage, loan, or credit card and can affect your score by a few points. A soft inquiry will occur if someone needs to look into your credit as part of a background check or to get “pre-approved” for insurance quotes.

Upon reviewing all the data in your report, you may find an error or an item you wish to dispute. There will be information on the report as to how you can go about contacting the agency regarding the dispute. The agency has 30-45 days to issue a reply. The disputed item will show up as disputed on your credit report until it’s resolved.

There may be a lot of information on your credit report, however, being armed with the knowledge on how to read your credit report will aide you in achieving your financial goals!

 

Wishing you financial success always,

-Helen