How to Read Your Credit Report, Step by StepPublished on July 11, 2022 by Daniel Azzoli
Your credit score can be an important indicator of your financial health. For instance, if you ever need to apply for a loan in case of emergency, a bad score can prevent you from qualifying for one.
How do you know what your credit score is, what it means, and what you can do to potentially build your credit history? This starts by understanding how to access and read your credit report.
Many banks and credit cards offer real-time credit score information via online portals. This information gives you a glimpse of where you stand, but it’s not the same as a full version of your credit report.
You are entitled by law to a free copy of your credit report annually. You can get it by visiting AnnualCreditReport.com. You can also get your report once a year from each of the major credit bureaus: Experian, Transunion, and Equifax.
You can get a good look at your credit score throughout the year by requesting a report from one bureau at the beginning of the year, from the second bureau four months after that, and from the third bureau four months after that.
Here are some of the things you’ll find on your credit report, what they mean, and how you can assess them to make sure there are no mistakes.
When reading your credit report, your first step is to confirm the personal information listed is correct. This information includes:
- Your full name
- Former names, like a maiden name or frequently used alias
- Your Social Security number
- Your birth date
- Your current address
- Previous addresses
- Your phone number
- Your email address
Check each of these for errors of any kind, such as a typo or an incorrect address. Any error leaves an opening for mistakes to appear on your credit report, and may even have an impact on your credit score.
Often, you will find a list of your employers and the dates when you worked there.
This is rarely a complete list, especially for adults who have worked a variety of gigs and side hustles. Don’t worry if there are gaps in your career. But if there are jobs listed that you didn’t have, it could mean your history is being confused with somebody else’s.
This includes all individual and joint credit accounts, plus accounts that list you as an authorized user, generally for the past decade. You’ll find open and closed accounts there, though some closed accounts will fall off after a certain amount of time.
As with your personal and employment information, what you’re looking for here is errors. Are there any accounts listed that surprise you? Look for anything that doesn’t match your records.
Each account listed will include a payment history with a status report, such as:
- 30 days late
- 60 days late
- 90 days late
- 120 days late
- 150 days late
Look at every past-due notation. If it’s inaccurate, contact the creditor and ask them to fix it. You can also go directly to the reporting bureau.
Account balances are described in two forms:
- The current balance on each account as of the last date your creditors reported to the credit bureau
- The highest balance in the history of the account
Check these for accuracy, noting any errors you find and following up where appropriate. You want to make sure that you work on getting these removed as any incorrect information may impact your credit score, and therefore your ability to qualify for another loan.
Each listing on the report includes the name and contact information for the creditor and the date you opened the account. Review this as you did your personal information, checking for errors.
Sometimes the creditor on your report has a different name or address than the business you got a loan from, but only because the corporate structures and filings differ from where you physically made the deal. If you see a discrepancy, check on this first before assuming it’s an error.
These lists show how much you owe on any account as of the reporting date for that month. For revolving credit accounts like a HELOC or credit card, this will also show the credit limit for that account.
Go over each, looking for any errors, or discrepancies. Keep in mind that this number is reported once per month, so it may be slightly different from the balances shown when you log in to each account.
Each account will have a specific listing showing its status as of that month. Here’s what they mean:
- Open: The account is currently active.
- Closed: The account is no longer active.
- Paid: The balance was paid in full.
- Refinanced: The balance was paid in full by taking out a new loan.
- Transferred: The debt was moved to another company.
- Foreclosed: The account has gone into default and the lender has taken back the collateral on the loan (such as a house in a foreclosure or the car in an auto loan).
- Charged Off: The account is at least 90 days past due and considered delinquent.
Make sure to check for any errors on any of these accounts. They’re more common than you might think.
Your report also includes public records of your debt, including bankruptcies, foreclosures, repossessions, and similar actions. Unfortunately, these records are almost always damaging. Generally, public records and bankruptcies may stay on your credit report for seven to ten years.
Check the public records for accuracy and for any listing on your record after it should have been removed.
The final section of your credit record details who has accessed your credit information. In this section, you’ll find two kinds of listings:
- Soft inquiries or “soft pulls.” These happen when you check your credit or a creditor does an unofficial check to assess what they can potentially offer you.
- Hard inquiries. These typically happen when lenders thoroughly check your credit to assess your loan application.
Soft inquiries do not impact your credit score. Hard inquiries do since multiple attempts to get credit in a short period can indicate somebody who’s in bad financial shape.
Look at all inquiries carefully. They can be one of your earliest warning signs of attempted identity theft.
Getting errors removed can be time-consuming, but it’s an important thing to do if you do run into any mistakes on your report. It starts with contacting the credit bureau whose report contained an error. Include the exact error, the actual situation, and copies of any proof you have. After that, you have to wait for them to respond, then move forward as their response requires. The sooner you start this process when you find an error, the better.
In the game of credit, reading your credit report and correcting errors is essential. But, this isn’t the only way to potentially impact your credit history.
Your FICO credit score is calculated by using five categories. Here’s what they are, how big a role they play in your score, and what you may be able to do to impact them:
- Payment History (35%): Whether or not you pay on time. You may impact this by paying bills on their due dates, including potentially negotiating a different payment plan to make this possible.
- Amounts Owed (30%): How much you owe compared to your credit limits. You may impact this by reducing your balances to under 30% of your limit, and then to as close to zero as you can manage.
- Length of Credit History (15%): How long you’ve had your various credit accounts and how long it has been since you’ve used them. You may impact this by not canceling unused cards and opening new accounts infrequently.
- Credit Mix (10%): How many different types of credit you have, such as cards, retail accounts, installment loans, and lines of credit. You may impact this by responsibly increasing the variety of credit types you have.
- New Credit (10%): If you have any new credit accounts or inquiries for new credit. You may impact this by not applying for new credit too often.