How Do I Read My Credit Report?

90% of all consumers don’t even know what is on their credit report! Learn why this is the biggest mistake you can make.

Although each credit reporting agency formats and reports this information differently, all credit reports contain basically the same categories of information. Your social security number, date of birth and employment information are used to identify you. These factors are not used in scoring. Updates to this information come from information you supply to lenders.

Identifying Information

Your name, address, Social Security number, date of birth and employment information are used to identify you. These factors are not used in scoring. Updates to this information come from information you supply to lenders.

Credit Summary

The credit summary section will tell if you declared bankruptcy or have public records or collection items. It will also show what date your file was established and the latest reporting date of trade. It will also break down the amount of high credit you have in your revolving and installment accounts and how much you owe on these. Installment loans are loans with a fixed payment and ending date, such as a car loan or bank loan. Revolving debts are debts that usually have no fixed ending dates, such as credit cards. You can usually add more debt to these accounts as you pay them down. High credit is the amount of money that you can borrow. The owed amount is the amount that you have actually borrowed. For instance, you might have a $5000 credit limit (high credit) on your Visa, but you may have only borrowed $1500. Creditors like to see few revolving debts. Installment debts are better in the long run because you pay lower interest over the long haul

Trade Lines

These are your credit accounts. Lenders report on each account you have established with them. They report the type of account (bankcard, auto loan, mortgage, etc), the date you opened the account, your credit limit or loan amount, the account balance and your payment history.

Inquiries

Believe it or not, this area is important to creditors. They look to see if you have applied anywhere else in the last few days. Most creditors will then call the companies that made those inquiries and ask if you opened a loan with them. Also, they will be looking to see if you are an indiscriminate borrower. Let’s say that you have 10 new inquiries on your credit report and six are from department stores and credit cards. To a creditor it looks as if you are going wild, borrowing from everyone in sight. This is not good! You might be able to pay your existing bills fine, but how does the creditor know that you can handle all of this new debt? They can’t and most likely you will be denied.

When you apply for a loan, you authorize your lender to ask for a copy of your credit report. This is how inquiries appear on your credit report. The inquiries section contains a list of everyone who accessed your credit report within the last two years. The report you see lists both “voluntary” inquiries, spurred by your own requests for credit, and “involuntary” inquires, such as when lenders order your report so as to make you a pre-approved credit offer in the mail.

Current Status

The current status area will usually provide a letter and a number, such as R1 and I1 or R9 and I9. This might look like an undecipherable code, but it’s not! The R means the account is a revolving account and the I means that the account is an installment account. The numbers sometimes vary but generally the higher the number the worse the credit: I-1 is usually a good debt; I-2 means that you have been 30 days late; I-3 means you have been 60-90 days late; I-4 means you have been 120 days late; I-7 means the collateral was repossessed; I-8 is a collection account; and I-9 means the debt was written off as a bad debt. Some credit reporting agencies reverse this number system and some use a 9 to indicate repossessions and foreclosures, but the majority stick with the above system.

High Credit

This tells how much you are able to borrow in a revolving account or how much you initially borrowed in an installment loan. Creditors scrutinize this area to make sure you do not have too much available credit. Close any accounts with available credit that you do not use.

Owes

This area tells the creditor how much you still owe on the account. This is also an important area, as it tells creditors if you are consistently at your high credit on all your bills.

This also tells creditors how much, if any, of your balance is past due. It is self-evident why you want this area to say zero!

Terms & Payments

This section is mainly for installment loans. For example if this section says 48/monthly, it means that you are paying 48 payments on a monthly basis.

It will also tell a creditor how many months have been reviewed on each account. If you just opened an account, it might say 1 month reviewed. The next area is date opened. This tells the creditor how long you have had this account. Most creditors will stay away from people who have recently opened several accounts.

Comments

Finally, an area is available for the creditor to make any comments on the account. Comments can range from student loan to account closed by consumer.

Public Record and Collection Items

Credit reporting agencies also collect public record information from state and county courts, and information on overdue debt from collection agencies. Public record information includes bankruptcies, foreclosures, suits, wage attachments, liens and judgments.

KEEP YOUR CREDIT RECORD CLEAN
Good credit is important, now and in the future. In most cases, it takes seven years for accurate, negative information to be deleted from a credit report. Bankruptcy information takes even longer to be deleted—10 years.

Know What Creditors Look for on Credit Reports
Understanding what types of information most creditors evaluate is important. Your credit report is a key part of your credit score, but it is not the only factor. You get points for other things like: