How to read/understand a credit report?
|Now that you have a copy of a personal credit report, you may have some questions about how to read the data and interpret what it is telling you. Credit reports come in several versions and formats, some easier to read than others. Typically reports from lenders fall into the more difficult to read category. On the other hand, credit reports obtained directly from the credit bureaus are designed for consumers and are therefore easier to understand. Below is an example that will guide you through a typical Credit Report.
What kind of information does your credit report contain?
Your credit report contains information about your past and present personal and financial situation.
This section contains information about you, the consumer. It includes your name, your current and previous addresses, and your current employer.
This section contains a personal comment that you submitted to the credit bureaus to be included in your report.
This section divides your accounts into five (5) types, then provides detailed information about the condition of those accounts. It also summarizes your open and closed accounts, public records, and inquiries.
Types of Accounts
• Real Estate Accounts are your home mortgage(s) including the first and any secondary mortgages
• Revolving Accounts, such as credit card accounts, are open-term accounts with payment amounts that vary depending upon the account balances and the account terms.
• Installment Accounts, such as car loans, are fixed-term accounts with fixed regular payment amounts.
• Other Accounts are accounts that don’t fit into one of the other account types previously listed or where the exact terms are not known
• Collection Accounts are accounts that are significantly past due and that have been transferred either to the creditor’s collections department, or to an external collector such as a collection agency.
Within each of the five (5) account type are these categories of information.
Additional Summary Information
Open/Closed Accounts – A total number of all accounts including open and closed accounts.
The information about public records contained in this category includes:
• the number of public records, and
• the total amount of money involved in all of your public records.
Inquiry – An inquiry is the record of a request from a third party, such as a bank or retail establishment, for your credit report. The number of inquiries is the total number of inquiries made for your credit report in the most recent two (2) years.
This section provides detailed information about all credit accounts in your name. Accounts are divided into five categories—Real Estate, Revolving, Installment, Other, and Collection.
Creditor Name: The abbreviated name of the person or agency that gave you the credit account, such as a bank, credit card company, or mortgage lender.
Account Number: An identifying number for your account. Typically, this would be a credit card number for a credit card account, or a loan identification number for a mortgage.
Type: The type of account. Some common account types are Real Estate, Automobile, Educational, and Credit Card.
Condition: A detailed description of the account’s payment status as of the last reported date.
Responsibility: The role that you play in the account. For example, “Individual” or “Joint.”
Pay Status: The state of the account. For example, “Open” or “Closed.”
Date Opened: The date when the account was opened.
Date Reported: The last date when any activity in this account was shown. Activities include payments, credit card billings, etc. Very recent activities may not yet show on your account, since it takes time for them to appear in the bureaus’ computer system.
Balance and Limit: The amount you presently owe on the account (based on the last reported activity) compared to the maximum amount of credit approved. Very recent activities may not yet have appeared in the bureaus’ computer system, so this balance may be a few days out-of-date.
Payment and Terms: The amount and number of monthly payments scheduled.
High Balance: The most you have ever owed on this account. In the case of a credit card, for example, this would be the highest balance you’ve ever accumulated. For a mortgage, it would be the initial amount of the mortgage, not the current paid-down principal.
Past Due: The amount of payment overdue as of the most recent reported activity. Very recent payments may take a few days to appear on your credit report.
Remarks: If there are any remarks by you or your creditor included in the account information, these remarks will appear here.
Two Year Payment History: At the bottom of the account information, you will see a histogram that graphically illustrates your payment history over the past two years.
Seven Year Payment History: A record of any late payments that have occurred over the past seven years.
Public records section includes bankruptcies, judgments, liens, satisfied judgments, and satisfied liens. All court records, including satisfactions, are considered negative by all credit grantors.
Also this section will provide detail information for those public records such as:
Additional Information for Bankruptcy only
This section provides details about all inquiries made for your credit history including the inquirer’s name and the inquiry date. You can use this information to keep track of those who access your credit report. Remember that only those with whom you have, or have requested, a credit relationship may make this inquiry.
Inquiries that you make about your own credit will not have a negative impact on your credit, however an excessive number of inquiries by others may.
How important is your FICO score? If you’re buying a house or car, getting insurance, or even applying for a job, it can be critical. Your FICO score, also known as your credit score, helps lenders determine what interest rate to give you, and many insurers use it to determine your premiums. A low score can even prevent you from renting the apartment you want or, worse yet, make you ineligible for certain jobs.
Surprisingly, with so much riding on this number, very few people understand how the FICO score is calculated, what the score means, or what they can do to improve their scores. Isn’t it time you learned more?
1. Evaluate your score. The point system used technically ranges from 0 – 999, but all or nearly all actual scores fall between 330 and 850.
2. Understand what affects your credit. The exact calculation of the FICO score is kept secret as proprietary information, but there are some general guidelines we can apply.
TransUnion and Equifax are the 2 main national credit reporting agencies that maintain these records and data. Each of these credit bureaus works independently from others to gather information from lenders and creditors and other businesses with the intention to maintain accurate and up to date consumer credit profiles. This information is then requested by other creditors, lenders, insurers, employers and landlords to be used in evaluating an individual’s financial responsibility.
You can also use Payment History Codes to identify Derogatory Items:
R – Revolving (most often a Credit Card)
You can challenge just about every negative item listed on your credit report that you believe are inaccurate, incomplete, misleading or outdated and should be removed or corrected.
Credit Bureaus have thirty (30) days to investigate your request and make changes on your Credit Report.
Your credit reports follow you throughout your life and can help you greatly — or hurt you so review them carefully!