Do You Know What Your Credit Report Says About You?
OK, so now you have your credit reports and wow -- there are an awful lot of numbers, abbreviations and terms you've never seen before. Trade lines, charge-offs, account review inquiries -- how do you read this thing?
First off, there are three major credit-reporting agencies in the United States: Experian, TransUnion and Equifax. Everyone is entitled to a free copy of their three credit reports -- one from each of the credit reporting agencies -- annually thanks to a new federal law. Looking at one is a useless endeavor; you need to look at all three. People tend to pull one and think everything is the same on all of them. That's not normally the case. The reports will have different information because it's a voluntary system, and creditors subscribe to whichever agency they want -- if any at all.
Experian stresses the importance of ordering the report directly from the credit bureau instead of asking a buddy who works at a bank to pull one for you. Those are written for people who work in the credit industry. The one you get from the credit bureau is designed for consumers. The information is the same, but it's much more consumer friendly. Well, not quite the same. But the differences are only to make the report easier for consumers to read. The report sent to a lender will list the credit bureau member numbers of your creditors and it won't have the complete list of every company that's pulled your credit information for promotional purposes, like pre-approved credit card offers.
Understanding the setup - A credit report is basically divided into four sections: identifying information, credit history, public records and inquiries.
Identifying information is just that -- information to identify you. Look at it closely to make sure it's accurate. It's not unusual for there to be two or three spellings of your name or more than one Social Security number. That's usually because someone reported the information that way. The variations will stay on your credit report; Don't be concerned about variations.
Other information might include your current and previous addresses, your date of birth, telephone numbers, driver license numbers, your employer and your spouse's name.
The next section is your credit history. Sometimes, the individual accounts are called trade lines. Each account will include the name of the creditor and the account number, which may be scrambled for security purposes. You may have more than one account from a creditor. Many creditors have more than one kind of account, or if you move, they transfer your account to a new location and assign a new number. The entry will also include:
The kind of credit (installment, such as a mortgage or car loan, or revolving, such as a department store credit card).
Whether the account is in your name alone or with another person.
Total amount of the loan, high credit limit or highest balance on the card.
How much you still owe.
Fixed monthly payments or minimum monthly amount.
Status of the account (open, inactive, closed, paid, etc.).
How well you've paid the account.
On Experian's report, your payment history is written in plain English -- never pays late, typically pays 30 days late, etc. Other comments might include internal collection and charged off or default. Charged off means the creditor has given upHe's made efforts to collect and written it off. Other reports use payment codes ranging from 1 to 9; an R1 or I1 on a report is an indication of a good payment history on a revolving or installment account.
The next section, public records, is the part you want to be absolutely blank. If you have a public record on there, you've had a problem. It doesn't list arrests and criminal activities; just financial-related data, such as bankruptcies, judgments and tax liens. Those are the monsters that will trash your credit faster than anything else.
The final section is the inquiries. That's a list of everyone who asked to see your credit report. Inquiries are divided into two sections. "Hard" inquiries are ones you initiate by filling out a credit application or taking your child to the orthodontist. "Soft" inquiries are from companies that want to send out promotional information to a pre-qualified group or current creditors who are monitoring your account. The soft inquiries are only shown on reports given to consumers. Are too many inquiries bad? You may have heard that a large number of inquiries can have a negative impact on your credit score, but you're probably OK. The vast majority of inquiries are ignored by the FICO scoring models. For instance, the FICO scores have at least a 30-day buffer period during which auto and mortgage inquiries are initially bypassed and not counted. It also counts two or more "hard" inquiries in the same 14-day period as just one inquiry.
If you find a mistake on your credit report -- an account that isn't yours or a disputed amount -- you'll need to fill out the form that comes with the report, or follow the instructions on the explanatory sheet. The process takes time because the creditors have 30 days to respond to a charge of a discrepancy. As long as a charge is in dispute, that dispute will show up on your report. Long-time lenders say it's common for reports to have errors. Some estimate that as many as 80 percent of all credit reports have some kind of misinformation.
Now, that you've read your report – contact us for help in finding someone to assist you in fixing the problems.
Thanks to Bankrate.com for their help in preparing this article.