How To Read Your Credit Report

When you learn how to read your credit report you can find credit reporting errors quickly — before they hurt your borrowing power.

Don’t feel bad if your credit report makes little to no sense. These complex records confuse a lot of people.

If one of your credit reports already includes errors — debts that don’t belong to you or past due balances that aren’t even late, for example — you’ll need to get them corrected to restore your good credit.

What Kind of Information Appears on Your Credit Report?

Interpreting your credit report gets confusing because the credit bureaus report more than just your account information. You may have to dig through several pages of other data to find an error in one of your accounts.

Inaccuracies can appear in other sections of your credit report such as your personal information and public records, too. Those errors could also cause problems in the future.

So let’s break down the kinds of data you can find — and correct — in your credit reports from the three major credit bureaus — Equifax, Experian, and TransUnion.

Information reported includes:

Personal Information

This section of your credit report tells potential lenders who you are. Who is the person attached to all this credit history?

It’s easy to blow (or scroll) right through these pages when you get a free copy of your credit report.

But you should review this section carefully for inaccuracies. Any unusual variations in your name, your address, your Social Security number, or your other personal information could mean your credit identity has been used without your knowledge.

• Name: This isn’t just the name you commonly use. The report will likely list any variations of your name. It may show your maiden name, your name with or without your middle name/initial, or any other names you may have gone by in the past.
• Address Information. You’ll not only see your current address, but any previous addresses, or any other addresses that might be associated with your name.
• Social Security Number. It probably won’t be your full Social Security number, but the last four digits, preceded by Xs. This is to protect the number from unintended third parties.
• Date of Birth. Make sure your birthday is accurate, particularly if you have a common name, like Jane Johnson or Steven Smith. An incorrect birth date could mean your report includes — or will include — credit accounts from a different person who shares your name.
• Employer Information. Like your address, this will include not only your current employer but also previous employers. While it doesn’t usually affect your credit score, you may want to correct information with the credit bureau if an employer you’ve never worked for is listed.
• Phone Numbers: You’ll see phone numbers associated with your credit accounts. If you see an old phone number, chances are it is still on file with the financial institution that issued the loan or credit card.

Credit Information

This is the core of your credit report, and you’ll spend most of your time studying this section.

The types of credit accounts you can expect to see in this section include:

• Mortgages, home equity loans, and home equity lines of credit
• Student Loans
• Auto Loans
• Personal Loans or Other Installment Loans
• Credit Cards

Your creditors will report on your credit accounts regularly. Each time there’s activity on your account — such as a payment, a payoff, or a late payment — the creditor should update the credit bureaus.

Account information for each credit item will include the following:

• Name and address of the creditor.
• Account number of your loan or credit line.
• Date the account was opened.
• Account Status – open, closed, paid, transferred, in collection, or some other description.
• Type of account (credit card, auto loan, etc.)
• Account ownership, which can be individual, joint, or authorized user.
• Original amount of the loan, or the maximum credit limit.
• Current outstanding balance and monthly payment.
• Payment history.

Pay close attention to all the information and make sure it is accurate. You can expect to see some timing differences, especially if you’ve just made a payment last week and it’s not recorded yet.

Focus most of your attention on your payment history because this is where many inaccuracies happen. If no late payments are indicated on the account, you’re in good standing.

But if you see something like “2X30” or “3X30, 2X60,” it means the creditor is reporting late payments — “30” denotes a payment that was more than 30 days late; “60” refers to a payment that’s more than 60 days late, while “90” means you are (or were) more than 90 days late; and so on.

If the status is “collection,” “charge off,” or a similar term, the account has been terminated with an unpaid balance. This could also mean the same debt appears separately as a collection agency account.

If any of this information is incorrect, you should be prepared to dispute it. We’ll get to that process in a bit.

Credit Inquiries

A credit inquiry will appear on your credit report each time someone has pulled your credit report. This can happen when you apply for a loan or a credit card, but it can also happen when you apply for a job, an insurance policy, or for an apartment rental.

There are two reasons you should be concerned with hard inquiries:

1. You’ll want to make sure the inquiry was one you authorized. If a hard inquiry appears on your credit report, and you don’t recognize it, it could indicate someone applied for credit, a job, insurance, or rental using your identity.
2. Too many inquiries on your credit report could hurt your credit score. Two or three inquiries in a year won’t hurt you. But if you have a half dozen or more, it’ll lower your credit score.

The best way to avoid problems with hard inquiries is to make sure credit reports will be pulled only infrequently. This will not only limit the number of inquiries on your credit report, but it will help you remember whether you authorized the hard credit check.

If you’re monitoring your credit on a regular basis, you should be on constant alert for any hard inquiries you didn’t authorize. It’s one of the most significant warnings of identity theft, and one you should never ignore.

Credit inquiries can remain on your report for up to two years, though their impact on your credit score declines rapidly after just a few months. Generally speaking, the greatest impact of a credit inquiry is from those incurred within the past 3 to 6 months.

Soft inquiries do not harm your credit score, but they do appear on your credit report for reference. Soft inquiries occur when you check your own credit score or get a quote from a lender or a pre-approval for a loan.

Public Records

This section usually appears near the bottom of your credit report, but it’s important to monitor it regularly. The public records section will include any type of financial, or legal action against you. That can include any of the following:

• Bankruptcy
• Foreclosure
• Tax Liens
• Liens are attached to any real estate you own
• Civil judgments
• Garnishments

Your credit report will not include criminal records or motor vehicle violations. But if your public records section includes tax liens, civil judgments, bankruptcies, or property liens, your credit score will suffer.

Getting these types of credit items removed is next to impossible if they’re accurate.

Be aware that public records can remain on your credit report for anywhere from seven to 10 years, or even longer if a judgment or lien remains unpaid.

Disputing Credit Errors

Knowing how to read reports from the three credit reporting agencies arms you with information. But knowing about errors isn’t enough. You’ll need to take action if you want to fix inaccurate data.

Before we get started on this section, let me point out something important: If the derogatory credit information on your report is accurate, there’s no way to have it legally removed.

If you have a collection agency account, a charge-off, a judgment, or a lien, the best strategy is to pay it off. The entry will remain on your credit report for seven to 10 years, but a paid public record is always better than an open one.

If you have late payments on current or paid loans, they can remain on your credit report for up to seven years. But time is your friend in this case since your credit score will improve as derogatory information “ages out.”

For example, late payment or paid collection that’s five years old has much less of an impact on your credit score than one that’s just a year old.

How To Dispute Errors in Your Credit History

If any information is reported in error, you can dispute it. Here’s how:

• Send a letter or an email to each credit reporting agency that shows the error. Dispute the error, and the credit bureau will be required by law to investigate your dispute within 30 days. If the lender confirms the information to be an error, it will be corrected by the credit bureaus.
• Contact the creditor directly. Inform them the information is an error, ask that they correct their records, and report the correct information to all three credit bureaus.

The Consumer Financial Protection Bureau keeps current contact information for all three credit bureaus here.

When it comes to disputing credit errors, there are two important steps you need to take:

1. Provide documentation of the error. It’s possible neither the credit bureau nor the creditor will accept your claim at face value. You may need to provide evidence that a collection, lien, or judgment is paid or that a late payment was, in fact, paid on time.
2. Get any acknowledgment of an error from the creditor in writing. You’ll need this in case they don’t report the corrected information to the credit bureaus. You can send a copy of your creditor letter or email to the credit bureaus, and they’ll correct the information on the reports.

If you’re disputing the error directly with the creditor, give them 30 days to report the corrected information to the credit bureaus. If they don’t correct the inaccuracies within 30 days, contact them and remind them to report the corrected information, or go directly to the credit bureaus.

If you continue to struggle, contact the Consumer Financial Protection Bureau for help.

IMPORTANT: Credit errors must be corrected with all three credit bureaus. If you get it corrected with one, the error will still appear on the other two.

Who Issues Your Credit Report and Where You Can Get Copies?

Your credit reports are issued by the three major credit bureaus:

1. Experian
2. TransUnion
3. Equifax

You can get a copy of your credit report from each of the three bureaus separately, but you’ll have to pay a subscription fee if you want to get regular updates.

Now, thanks to the Fair Credit Reporting Act, you can get a free report from all three bureaus through AnnualCreditReport.com. This is the only official source where you get copies of reports from each of the three bureaus.

Federal law entitles you to one free copy of your credit report from each of the three bureaus each year. I recommend you take advantage of this right even if you aren’t concerned about errors on your report.

A good strategy would be to order a report from each bureau at staggered intervals. For example, if you request your report from Experian on January 1, you can then order your report from TransUnion on May 1, and your Equifax credit report on September 1.

Not All Credit Reports are Created Equally

Be sure to get your reports from each of the three credit bureaus.

A lot of consumers don’t know this: The information reported on each credit bureau’s report can be very different. That’s because a creditor might report to only one or two of the bureaus.

As a result, one of your three credit reports could be accurate while the other two could have credit reporting errors. If you see only the accurate credit report, you won’t know about the inaccuracies on the other bureaus’ reports.

Since most lenders use your FICO score, which is an amalgamation of your other three reports, you may not know about your “bad credit” until you apply for a mortgage or a car loan and get quoted an astronomical interest rate.

Only by getting all three reports can you know for sure.

Get a Free Copy of Your Credit Report

Monitor Your Credit on a Regular Basis

Credit has an out-of-sight-out-of-mind quality. That is, you don’t think a lot about your credit until you need to make changes in your personal finances.

These changes often include loan consolidation, refinancing your home, or buying a new car or home.

This kind of credit utilization can reveal credit problems you never knew existed.

These problems can lead to higher interest rates, lower loan amounts, or outright denied credit applications.

By getting in the habit of monitoring your credit, you can prevent these sorts of surprises.

You’ll see negative items when they hurt your credit score. You can investigate and dispute inaccuracies before they lower your score.

How to Monitor Your Credit

Monitoring your credit is easier than ever. In addition to the free credit report you’re entitled to annually at annualcreditreport.com, you can also use free credit monitoring services to keep your credit in focus.

Two prominent monitors are Credit Sesame and Credit Karma. While neither will provide you with a full copy of your actual credit report from any of the three bureaus, they both will alert you of big changes in your credit score and hard inquiries.

These services report this data via email, text message, or smartphone alert.

In exchange for this service, you’ll see ads for credit cards when you log in to one of these services to investigate new information.

Limits of Free Credit Monitoring Services

You should be aware that free credit monitoring services won’t provide you with either an official copy of your credit report or even your actual credit score.

Credit report subscriptions cost money and are never offered free.

The credit scores and the credit information reported by free credit monitoring services come from parallel information which can clue you into real problems.

For example, you won’t get your actual FICO score – the one used by lenders – but typically a Vantage score, which is an informational score only. It will roughly approximate your FICO score, but it won’t be exact. In fact, you may just see a score range that can vary by 20, 30, or 40 points.

Some credit card issuers or mortgage lenders are building a FICO score check into their apps. Discover has been doing this lately, for example.

This offers another convenient way to keep an eye on your credit history so you’ll notice problems early.

What to Do When Your Credit Score Changes

It’s not always enough to monitor your credit score.

If a free service reveals a big change in your credit score or a loan application you didn’t submit, you’ll need to take more action.

You’ll need to find out exactly what negative items are causing your score to change.

If credit reporting errors have caused the change, use the steps above for disputing the inaccuracies.

Understanding How to Read Your Credit Report

As you can see, learning how to read a credit report is just Step One.

Yes, you need to be able to read and interpret what’s on your credit reports from all three credit bureaus.

But you also need to know what to do if you identify any negative information on your report.

If you find unpaid debt or late payments that are reported in error, dispute them as quickly as possible.