How To Read A Credit Report

Knowing how to read a credit report is not rocket science, despite the fear the credit bureaus attempt to instill in you. Your credit report is divided into four sections: ID information, credit history, public records and inquiries.

Check your identifying information to make sure it's accurate. Errors such as wrong name spellings, wrong middle initials and transpositions in Social Security numbers creep in because of the human factor: someone reported or entered the information wrong. It’s important to set the record straight, otherwise you may inherit someone else’s less than stellar credit history and be tied into someone else with a similar name. Fathers and sons are good examples where both have the same first name or are Raymond II, Raymond III, etc.

Other information to check includes current and previous residential addresses, date of birth, telephone numbers, driver's license number, employer and your spouse's name. Make sure that the latter reflects her married identity and your last name. If your wife has used variations of her last name by hyphenating it and hasn’t always been consistent, you’ll have to straighten this out.

This is where the rubber meets the road. From your files with each creditor account, check the creditor name listed, compare account numbers, amounts charged and status of each account. Sometimes you’ll have more than one creditor account number with a creditor, depending upon the types of accounts you’ve held, or if you’ve moved and the creditor has transferred your account to a new processing location and reassigned a new number.

Check dates you opened the account, the type listed such as mortgage car loan, refi, revolving credit or department store credit card. You’ll see a code indicating the highest balance on the account, current balance (minus any payments made since you requested the report), minimum payments, status of the account: open, closed, inactive, paid, charge-off, collations, paid as agreed or settled.

Each bureau will send you a short list of their codes and directions how to read a credit report. Each one will use a different system, with Experian’s being the easiest to read because it’s written in Plain English.

Other bureau reports will use a code system ranging from 1 to 9. R1 or I1 indicates good payment history within 30 days on a revolving or installment account. R2, R3 and R4 indicate payment delays of 60, 90 and 120 days.

Check closely. Sometimes even if you’ve paid off an account on time, especially those you’ve reached a verbal agreement on, unscrupulous creditors will list them negatively or toss them to a collection agency.

This is one section you hope will remain forever blank. This is not the type of record that lists you as public enemy number one or any type of criminal record, but the financials that can immediately sink your loan application, including tax liens, bankruptcies and judgments. The only recourse you have to repair these is to pay them. Bankruptcies and judgments will drop off after seven to ten years. At least in theory they do.

This section lists records of every business or agency who requested to see your credit report. They are divided into two subcategories: “hard” and “soft.”

"Hard" inquiries are those you create by filling out a credit application. "Soft" inquiries are made by companies that send out promotional materials to pre-qualified groups and sell you something

It used to be that a large number of inquiries negatively affected your credit status. This isn‘t as true anymore because of FICO scores which ignore most inquiries or group them together within a 30-day period as people shop for mortgage or car loans. Any “hard” inquiries grouped during this period are only counted as one.

If you do, read the enclosed instructions on each bureau’s disputing process that was enclosed with your credit report. Read Credit Repair 101: Disputing Errors for more information on the process.

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