Ordering your credit report is the first step to becoming an enlightened credit user and consumer. Unfortunately, when it finally arrives you may be disappointed to see that – as far as you are concerned – it looks like a lot of gibberish! It’s important to understand what you’re looking at if you’re going to be smart about your credit.
Conveniently, all three of the credit bureaus use similar formats when they compile your report. That means that if you can understand one, you’ll likely be able to understand the rest. Here are the major categories and what they really mean.
There will be a bunch of personally identifiable information on your credit report. Don’t be surprised to see your full name, home mailing address, date of birth, recent employment information and Social Security number. All of those data points are used to accurately identify you.
Name changes (including potential aliases) may be detailed here. Women whose names have changed through marriage or divorce will certainly see more than one entry.
All of your active credit accounts will be documented on your credit report. The basic information about each will be listed. You’ll see the type of account, the length of time that it has been open, your borrowing limit, the total amount of the loan, the owed balance and the regularity and punctuality of your payments.
Regarding type, there are three basic types:
1. Revolving accounts – these tend to be credit cards. Revolving accounts are charge accounts with established credit limits. They require a payment each month.
2. Installment accounts – most traditional loans. Installment accounts are loans with a fixed extension and fixed, regular payments. Imagine your car loan – that is an installment account.
3. Mortgage accounts – these are the big guys. Mortgage accounts are likely to be the biggest accounts on your report. When you are buying a home or borrowing against your home, you are using a mortgage account.
Your credit report is accessible by companies to whom you apply for any form of credit, such as 1 hour payday loans. Every time that they check in on it, it is called an inquiry. Those credit inquiries will appear on your report so that other would-be creditors know how often you are applying for credit.
There are a few ways to categorize credit inquiries.
Hard inquiries are the ones that matter most. Those normally show up when you apply for a new $500 payday loan or credit card.
Soft inquiries are just like little check-ups. They occur even when you look at your own report.
Another categorization is by separating them along the lines of “voluntary” and “involuntary.” Voluntary inquiries are approved by you. Involuntary requests are usually made by companies offering promotional and pre-approved deals.
Credit bureaus collect information on the public record, also. If you appeared in court as a result of unpaid debts or other owed monies, you may see that show up on your report. Many times, these are big red flags for creditors.
Among other things, bankruptcies, foreclosures, law suits and liens appear under this section.
Satisfactory And Negative Accounts
This is the meat and bones of your report. In this section, you will see all of your satisfactory accounts separated from all of your problematic ones. It will be very easy for anyone looking at your report to see how you fare with your credit.
If you miss payments, defaulted on a loan, are racking up debt or causing some other credit-related issue with one or more of your accounts, it will be separated and included in a section called “Negative Items.”
For anyone looking for the nitty gritty, check out the Equifax report first. Equifax includes a neat, one-page summary of all your accounts. The data included there is easy to read and process. Length of your credit history, overall debt-to-credit ratios and other really helpful information can be found there.
Review all of the satisfactory and negative accounts, but pay especially close attention to the bad stuff. Sometimes errors show up on your report! If you find one, address it immediately. It could be seriously injuring your credit.
Formats And Codes
While each of the reports is generally the same, it probably won’t hurt to get familiar with each of them individually. After all, each may use different systems to represent public records information, payment histories and other data.
Equifax report information, Experian report information, Trans-Union report information – once you’ve reviewed these pages, you should be fully capable of interpreting the coding of any of your credit reports!
How frequently should I check my report?
Conventional wisdom suggests checking your report once annually. If you feel like you want to look at it more frequently than that, the only thing stopping you is the cost. Each bureau is required to give you one free copy per year. The main exception to the once-per-year advice is that you should look it over before making any big purchases so you don’t run into any surprises.
Why do the reports differ?
The credit bureaus do not share information with each other (because they are actually profit-seeking private corporations and thus, competitors) and not every business reports to all of them. Most companies find it sufficient to report to just one. That’s why you get differences.
What is my “High balance”?
This number represents the peak amount that you have ever owed on that account. If you once owed $1,000 and now only owe $100, the high amount is still $1,000.
How can I check my late payment status?
Each of the reports makes your late payment information pretty self-explanatory. If you see numerical representation of late payments, the only number you want is a zero. “30,” “60,” “90” and “120” are all bad, and the bigger the number, the worse off it is. “Never late” is the written version of “0.”
I’m seeing some interesting phrases – “charged-off,” “placed for collections,” etc. – what do those mean?
Notations such as these mean that you went months without making an owed payment. As a result, the creditor wrote the debt into their accounting books as a loss. They didn’t expect you to suddenly show up and pay what you owed. These are quite bad, as far as potential lenders are concerned.
I’m married – are our credit reports related?
Not necessarily. All of your individual, private accounts will be listed on your credit report only. If you share joint accounts with your spouse, however, those will be documented on both reports. That condition also applies if you’ve made your spouse an authorized user/signer on your credit accounts.
Are my credit report and credit score connected?
Yes. In fact, your credit score is the briefest possible representation of your entire credit report. Without the report there would be no grounds upon which to base your score. Good report, good score.
“Account close by credit grantor” – is that bad too?
Yes, this is also a phrase you don’t want to see. This happens when a creditor suspects that your debts are exceeding your ability to pay. If that occurs, the creditor eliminates your access to the funds.
If you have more questions, keep checking around the site. We have answers to all your credit-related concerns!