You would be surprised at how many people could not tell you what their credit score is, or how many people know nothing about credit reports in general. There is a fear of numbers out there, and a lack of knowledge that is causing people to lose track of their finances. Even those few who do actually pull their credit reports do not know how to read them. There are some basics that you should know when trying to read a credit report.
The first thing you need to be aware of is if your credit report is filled by someone else other than yourself, this will result in a credit inquiry on your report, which will also affect your credit score. You will not be aware of this at all. The inquiry counts as a penalty and will make a small difference on your score.
When you look at the top of a credit report, you will see the words "Prepared For" as well as "Attention." Prepared For will tell you what lender the credit report was actually made up for (who dropped the report), while the Attention blank will give you the actual name of a person and not just the company. Usually the Purpose of the Loan is also shown; and the Report Type will explain whether the credit report is for an individual or for a joint partnership.
Other sections that will be included on your credit report will be: Mortgage / Landlord Verification, Credit Summary (this can be the scary section), Vendor Errors (located right under the Credit Summary so you do not look completely incompetent, often times, depending on the section, they do), and Scoring. There is sometimes a reason that is labeled as to why the score is what it is, but not always. There is no rhyme or reason for these reports; the entire field is clearly not rocket science.
The Vendor Information works on a number score basis, and these scores will be listed. A 0 will mean that the account is too new to rate for that vendor, a 1 will mean that you paid them, 2-6 will tell how many days you have been blowing the vendor off (for instance 5 means 120 days past due) , 7 shows that you are bankrupt, 8 means that they had to come to your home and take away your things (repossession), and 9 means that you have bad debt issues. If you get an X that means that they do not have any information on you – yet. If you see an N this will mean that you have a zero balance. Make sure that you have provided the right calming essentials when reading this part of the report because a number 2-9 could have given you a really bad day, or headache, take your pick.
Trying to untangle your credit report can be, at the very least, frustrating and discouraging. There are benefits to it though. By learning to read your credit report you are taking control of your financial well being and not leaving it in the hands of chance. Be patient and try to understand what you're reading. In the long run it will be worth it to you to figure it all out. By following these few steps you may find yourself coming out well ahead of the rest of the pack.