Credit Reports Indepth

How to read a credit report! 

Understanding a credit report can be crucial for managing your financial health. While credit reports may vary slightly in format from different sources, the key components generally remain the same. Here are some general steps to help you understand your credit report regardless of the format:

  1. Personal Information: Start by reviewing your personal information such as your name, address, social security number, and employment history. Ensure all details are accurate and up to date.
  2. Account Information: Look at the accounts listed on your credit report, including credit cards, loans, and mortgages. Check for any discrepancies or accounts you don't recognize.
  3. Payment History: Examine your payment history to see if you have any late payments, defaults, or accounts in collections. Timely payments are crucial for a good credit score.
  4. Credit Inquiries: Check for any inquiries made into your credit report. Too many inquiries in a short period can negatively impact your score.
  5. Credit Utilization: Understand how much of your available credit you are using. Keeping your credit utilization low can positively impact your score.
  6. Public Records: Look for any bankruptcies, liens, or judgments listed on your report. These can have a significant impact on your credit score.


1. Personal Information

**Specific Steps to Check for Correct Information on a Credit Report:**


1. **Obtain a Free Credit Report:** You can get a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once per year at ​annualcreditreport.com.


2. **Review Personal Information:** Check the following personal information on your credit report:


    * **Name:** Legal name as it appears on your government-issued ID

    * **Address:** Current and previous addresses

    * **Social Security Number:** Last four digits or a masked version

    * **Date of Birth:**

    * **Contact Information:** Phone number and email address


3. **Identify and Dispute Errors:** If you find any incorrect or outdated information, you should dispute it with the credit bureau that issued the report. You can do this online, by mail, or by phone.


4. **Provide Supporting Documentation:** When disputing an error, you may need to provide supporting documentation, such as a copy of your government-issued ID, utility bill, or pay stub.


5. **Follow Up:** The credit bureau has 30 days to investigate your dispute and respond. Follow up with them if you don't receive a response within that time frame.


 

2. Account Information


1. **Review Account History:** Examine the account history for each account listed on your credit report. Look for any discrepancies, such as:


    * Unfamiliar accounts

    * Incorrect account balances

    * Late payments that you did not make

    * Closed accounts that are still listed as open


2. **Verify Account Details:** For each account, check the following details:


    * **Account Number:** Last four digits or a masked version

    * **Account Type:** Credit card, loan, mortgage, etc.

    * **Credit Limit or Loan Amount:**

    * **Date Account Opened:**

    * **Date Account Closed (if applicable):**

    * **Current Status:** Open, closed, delinquent, etc.


3. **Identify and Dispute Errors:** If you find any incorrect or outdated account information, you should dispute it with the credit bureau that issued the report. You can do this online, by mail, or by phone.


4. **Provide Supporting Documentation:** When disputing an error, you may need to provide supporting documentation, such as a copy of your account statement, payment history, or a letter from the creditor.


5. **Follow Up:** The credit bureau has 30 days to investigate your dispute and respond. Follow up with them if you don't receive a response within that time frame.


3. Payment History


1. **Review Payment History Table:** Locate the payment history table for each account on your credit report. This table will show the status of your payments for the past 24-36 months.


2. **Check for Late Payments:** Look for any late payments marked as "30 days late," "60 days late," etc. Even a single late payment can negatively impact your credit score.


3. **Identify Defaults:** A default occurs when you fail to make payments on a loan or credit card for a certain period of time. Defaults are reported on your credit report and can significantly lower your score.


4. **Check for Accounts in Collections:** If you have any unpaid debts that have been sent to a collection agency, these will be listed on your credit report as "accounts in collections." Accounts in collections can also damage your credit score.


5. **Dispute Errors:** If you find any incorrect or outdated information in your payment history, you should dispute it with the credit bureau that issued the report. You can do this online, by mail, or by phone.


6. **Provide Supporting Documentation:** When disputing an error, you may need to provide supporting documentation, such as a copy of your payment history or a letter from the creditor.


7. **Follow Up:** The credit bureau has 30 days to investigate your dispute and respond. Follow up with them if you don't receive a response within that time frame.



4. Steps to Manage and Avoid Negative Impacts from Credit Inquiries


1. **Limit Unnecessary Inquiries:** Only apply for credit when necessary. Avoid applying for multiple credit cards or loans within a short period of time.


2. **Space Out Inquiries:** If you need to apply for multiple credit products, try to space out your inquiries over several months to minimize the impact on your credit score.


3. **Use Soft Inquiries:** When possible, use soft inquiries to check your credit score or pre-qualify for a loan. Soft inquiries do not affect your credit score.


4. **Monitor Your Credit Report:** Regularly review your credit report to track any inquiries made on your behalf. You can obtain a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once per year at ​annualcreditreport.com.


5. **Dispute Unauthorized Inquiries:** If you find any unauthorized inquiries on your credit report, you should dispute them with the credit bureau that issued the report. You can do this online, by mail, or by phone.


6. **Provide Supporting Documentation:** When disputing an unauthorized inquiry, you may need to provide supporting documentation, such as a copy of your identification or a letter from the creditor.


7. **Follow Up:** The credit bureau has 30 days to investigate your dispute and respond. Follow up with them if you don't receive a response within that time frame.

5. Credit Utilization


Credit utilization, which accounts for 35% of your FICO score, measures the amount of credit you are using compared to your total available credit. A higher credit utilization ratio indicates that you are using a larger portion of your available credit, which can negatively impact your score.


**How Credit Utilization Affects Your Score:**


* **Low Credit Utilization (below 30%):** This is considered ideal and can positively impact your score.

* **Moderate Credit Utilization (30-49%):** This is still acceptable but may slightly lower your score.

* **High Credit Utilization (50% or more):** This can significantly lower your score and raise red flags for lenders.


**Tips to Keep Your Credit Utilization Low:**


* Pay off your credit card balances in full each month.

* If you carry a balance, keep it below 30% of your credit limit.

* Request credit limit increases as your income and credit history improve.

* Monitor your credit utilization ratio regularly and take steps to reduce it if necessary.


**How to Keep Credit Utilization Low**


**Step 1: Track Your Spending**


* Use a budgeting app or spreadsheet to track your income and expenses.

* Categorize your expenses to identify areas where you can reduce spending.


**Step 2: Set a Budget**


* Create a realistic budget that allocates funds to essential expenses, savings, and debt repayment.

* Stick to your budget as much as possible to avoid overspending.


**Step 3: Use Credit Responsibly**


* Only use your credit card for necessary purchases that you can afford to pay off in full each month.

* Avoid carrying a balance on your credit card, as this will increase your credit utilization ratio.


**Step 4: Pay Your Bills on Time**


* Make all your credit card payments on time, every month.

* Late payments can negatively impact your credit score and increase your credit utilization ratio.


**Step 5: Monitor Your Credit Utilization Ratio**


* Regularly check your credit report to monitor your credit utilization ratio.

* Aim to keep your ratio below 30% to maintain a good credit score.


**Step 6: Request Credit Limit Increases**


* As your income and credit history improve, you can request credit limit increases from your credit card issuer.

* This will increase your available credit and lower your credit utilization ratio.


**Step 7: Be Patient**


* Building a good credit score takes time and consistency.

* Follow these steps diligently and monitor your progress over time.

6.Public Records on Credit Reports


Public records are a type of consumer information that can be included on credit reports. Public records include information such as bankruptcies, judgments, liens, and tax liens.


**Step-by-Step Guide on How to Review Credit Report for Public Records**


1. **Obtain a copy of your credit report.** You can obtain a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once per year at ​annualcreditreport.com.

2. **Review the "Public Records" section of your credit report.** This section will list any public records that have been reported to the credit bureau.

3. **Check the accuracy of the information.** Make sure that the information in the Public Records section is accurate and up-to-date. If you find any errors, you can dispute them with the credit bureau.

4. **Understand the impact of public records on your credit score.** Public records can have a negative impact on your credit score. The type of public record and the age of the record will affect the severity of the impact.


**Additional Tips**


* If you have any public records on your credit report, you may want to consider taking steps to improve your credit score. This could include paying off debts, disputing errors on your credit report, and building positive credit history.

* You can also contact the creditor who obtained the judgment against you and try to negotiate a settlement. If you can pay off the debt or settle the judgment, the creditor may be willing to remove the judgment from your credit report.

What is a Judgment?


A judgment is a court order that requires a person to pay a debt or damages. Judgments can be obtained in a variety of civil lawsuits, such as lawsuits for breach of contract, personal injury, and medical debt.


**What Judgments Can and Cannot Be Reported to Credit Reports?**


As of July 1, 2017, the Fair Credit Reporting Act (FCRA) limits the reporting of certain types of judgments on credit reports. Specifically, the following judgments can no longer be included on credit reports:


* Civil judgments

* Tax liens

* Medical judgments


**Exceptions:**


Judgments may still be reported on credit reports if:


* The judgment is related to a criminal offense.

* The judgment is for more than $75,000.

* The judgment is for unpaid child support or alimony.


**How to Prevent a Judgment from Appearing on Your Credit Report**


The best way to prevent a judgment from appearing on your credit report is to avoid getting into debt. If you do get into debt, make sure to pay your bills on time and in full. If you are unable to pay your debts, contact your creditors and try to work out a payment plan.


**Additional Information**


* Judgments that are not reported on credit reports can still be accessed by lenders and other creditors through other sources, such as LexisNexis.

* If you have a judgment against you, you may be able to have it vacated or satisfied by paying off the debt or negotiating a settlement with the creditor.

* Bankruptcy can discharge certain types of debts, including judgments. However, bankruptcy can also have a negative impact on your credit score.