Have you ever read your credit report? Okay, have you read it and understood what is contained on its pages? If not, continue reading to gain an understanding of how to read your credit history and to understand certain terms, such as "charge-offs" and "inquiries," which may be included on your report.
You may be wondering why it is important to review your credit report. The reason is that it is the key to your financial success! Everything you do financially will hinge upon your credit score. (Unless you are independently wealthy, of course!) Therefore, it is vitally important that you understand what is contained on your credit report.
So, the first step is to obtain a copy of your credit report. You can do this by contacting one of the three major credit reporting agencies (Equifax, Experian, or TransUnion) to request a copy. These credit reporting bureaus are legally required to provide you with one free copy of your credit report once every year, upon your request. Alternately, you can contact Annual Credit Report at (877) 322-8228 to obtain a copy of your credit report.
Reading a credit report can be confusing to say the least. So, let's take some of the mystery out of this process. A credit report is broken up into several different sections. These sections pertain to identifying information, credit history, public records, and inquiries, and should be readily identifiable on your credit report by their title or heading.
Normally, the first section you will come to deals with "identifying information." This section pertains to personal information such as your name, address (both current and previous), and date of birth. You will need to check this section for accuracy. Make sure that all the information is listed correctly, even down to zip codes of previous addresses. Believe it or not, something as small as an incorrect zip code can have lasting effects on your credit history and your ability to obtain a loan!
The next section should pertain to your "credit history." This section will contain all the financial information that the credit bureau has on file for you. The items listed will report information such as what type of credit account (Is this a mortgage, car loan, credit card, etc.?), The amount owed (What is your balance?), Payment details (Are you behind? Do you pay on time?), and the current status of the account (Is this account current, paid in full, past due, charged off, etc.?).
Are you wondering what a "charge off" is? Having a charge off on your credit report means that a credit company has suspended the account and written off the debt. Once the credit company wrote the debt off, they likely passed the debt on to a collection agency. Once this has been done, the only way to remove the "black mark" from your credit history is to pay the debt in full.
The following section deals with "public records" and will report your financial discrepancies. Financial discrepancies can include court judgments and bankruptcies. Public records will drastically harm acceptance of any applications for credit which you submit. Therefore, it is best if this portion of the credit report is blank. Some people have worried that legal actions related to criminal convictions will be listed here. They are not. A credit history is used strictly for financial purposes.
Any time you or a credit company inquire as to your credit, such as requesting a copy of your credit history, the request will be shown in the inquiries section. Even though an occasional inquiry should not cause an issue for a credit company, numerous inquiries within a short period of time will raise red flags for credit companies. In light of this, it is wise not to have too many inquiries listed in this section.
The purpose of reviewing your credit report is to note any inaccurate or false information and work to get it revised. If you should find one or more mistakes on your credit history, you can write to the appropriate credit bureau and request that the information be corrected. Be sure to include any information or documentation you have which substantiates your claim. If you are successful in getting inaccurate or false information corrected, this will positively impact your credit score and this is, after all, the reason for taking the time to sit down and review your credit report.