How to Read a Credit Report?

In a world rife with identity theft, individuals need to be both diligent and proactive in protecting their personal identifying information. A way in which to accomplish this is by policing one’s credit report on a regular basis. A credit report contains and individual’s credit information. This credit information is compiled by three credit bureaus: TransUnion, Experion, and Equifax. Each of these companies maintains a file containing information reported to them by various creditors regarding an individual financial history.

Individuals are entitled to one free consumer credit report per year. There are various methods for obtaining a credit report from these bureaus which includes: online access, telephone request, and mail order request. Whatever manner in which the report is received, the real challenge will be making sense of the information it contains. There are four main sections to the credit report which are outlined below.

Identifying Information

This section identifies the individual for whom the credit history is reported. The identifying information provided typically includes the name, address, social security number, date of birth, and other forms of identification. It is imperative to carefully verify the information contained in this section. Discrepancies can lead to difficulties obtaining new lines of credit should the need arise.

Credit History

The credit history section includes the information reported to the bureau concerning existing lines of credit. The name and address of the reporting entity is included along with the type of credit, current balance, and payment status. A good credit report will show a payment status as “current” or “pays as agreed” and the payment history will show no late or missed payments.

This section may also report any lines of credit that have been turned over to collection agencies. The collection agency’s name and address along with balance and payment information is included. These reports can have a negative impact on the credit rating of the individual.

Public Records

Any outstanding legal issues concerning the individual will be found in this section. Bankruptcies, liens, and judgments are examples of the reports that are often entered here. It is important to note that only legal cases related to the financial status of the individual will be contained on the report. The report will not contain speeding tickets or any other such legal matters.

Inquiries

The final section of the credit report will provide information about credit inquiries submitted to the bureau for the individual. Inquiries are typically reported when an application for a new line of credit has be submitted. The creditor with whom an application has been submitted will make an inquiry to determine the applicant’s credit risk. Excessive inquiries can have a negative effect on the credit rating of the individual.

It is important for the individual endeavoring to maintain a solid credit rating to understand how to read a credit report. The information contained in these reports can not only identify criminal activity, but also reveal areas for improvement. Information contains power that can only be wielded when properly comprehended.