It may seem intimidating to read a credit report, but breaking down the information in your credit reports is easier than you think. When you understand how to read a credit report accurately, you gain a better understanding of your overall finances. It also makes it easier to identify any errors or inconsistencies that might be negatively affecting your score unfairly.
Your credit report is basically just a detailed record of your credit history and is used to determine your credit score as well as other financial decisions by lenders and other parties. Our best piece of credit report advice? Learn how to understand credit reports and check for errors at least once a year.
How to get a credit report
You can order one free copy of your credit report each year from the three main reporting bureaus: Equifax, Experian and TransUnion. You can get all three reports at once for free by ordering directly from AnnualCreditReport.com.
How to read your credit report
While there may be minor differences in how each of your credit reports is organized, all three bureaus should provide accurate information in these five sections.
Personal information
Your personal information will include your name (including former names and any aliases), your Social Security number, and birth date. Your report will include current and previous addresses and contact information like phone numbers and email addresses.
Watch out: Check for typos and incorrect identity information
Make sure that all the personal information included in your credit report is correct. Every part of your credit report needs to pertain to you: not your dependents, not your former spouse, and especially not a stranger with the same name.
A misspelled name (even just an incorrect middle initial), an address you don’t recognize, an errant digit in the Social Security Number or a phone number that isn’t yours are all indicators that your report may have been confused with someone else’s.
Employer history
Your credit report will include current and previous employers. Employer history is sometimes included in the personal information section.
Watch out: Make sure you recognize all employers listed
Your employment history doesn’t affect your credit score since it has nothing to do with your credit or your debt. It’s included on your credit report to verify your identity, so finding incorrect information like company names you don’t recognize or employers you never worked for is a red flag.
Credit history
Your credit history is the largest section of your credit report and the most important. Your FICO credit score is calculated with quite a few factors, including amounts owed (30 percent), the length of credit history (15 percent), new credit (10 percent) and credit mix (10 percent). But your payment history determines the majority of your credit score calculation (35 percent).
Since your credit history includes the most important pieces of data used to determine your credit score, you’ll need to spend time carefully checking for errors in this section of the report.
The credit history of your credit report will include the following components:
- Current and closed accounts from the past seven to 10 years. This includes individual accounts, joint accounts and ones where you’re listed as an authorized user. You’ll see revolving credit, like credit cards and home equity lines of credit, as well as installment loans, like student loans, auto loans, or mortgages.
- Payment history. This is a record of all your payments, particularly whether or not minimum payments were made on time. Negative accounts will show any payments that are missed. Past-due amounts may be reported as 30, 60, 90, 120 or 150 days late.
- Current balances. This includes the current balance when the issuer reported to the bureau and the highest ever balance on the account.
- Names of creditors and lenders. Every account listed will include the name of the lender or creditor and the date when it was opened. Credit reports don’t include specific information about individual purchases.
- Credit limits or loan amounts. The current credit limit for revolving accounts and the original loan amount for any fixed installment accounts.
- Account opening and/or closing dates
- Account status. You may see accounts listed as open, closed, paid, refinanced, transferred or foreclosed. Some accounts may be marked as charged off, which is when a debt is between 90 and 180 days past due and considered delinquent.
Even after you’ve closed an account or paid off a loan, the accounts will appear in your credit history for a period of time. Negative credit information — including late payments, delinquent loans and charged off loans and accounts — can remain on your credit report for seven years. Credit information about closed accounts in good standing will disappear from your credit report after 10 years.
Watch out: Carefully review all account details, particularly payment history
Carefully scrutinize your credit history to check that the account number, account name, balance amount, payment history, payment due date and payment status are all correct.
Check to make sure that the account’s current credit limits or original loan amounts are correct. If the credit limit listed is lower than the one you actually have, it may hurt your credit utilization, which in turn impacts your credit score.
Public records
Public records related to debt will be included in your report. These could include bankruptcies, foreclosures or repossession. Public records stay on your report for seven years with one exception: Chapter 7 bankruptcy will stay on your report for 10 years.
All of these can hurt your credit score because they show a pattern of serious delinquency. This section does not include arrests, lawsuits, divorces or unaffiliated infractions with the law, like speeding tickets.
Watch out: Public records can seriously impact your financial prospects
If your credit report has a public record included, you may need to submit a credit report explanation to lenders to explain why there’s a negative item to your report.
Any public record included on a credit report must include your name, address, Social Security number or date of birth and must be verified with a courthouse visit at least every 90 days. Make sure the public record pertains to you with the correct name, date of birth, address and personal information included.
Tax liens no longer affect your credit, so you shouldn’t find property tax liens, income tax liens, federal and state tax liens or civil judgments on your report. If you find a tax lien on your credit report, you need to dispute the error with the credit bureaus.
Credit Inquiries
A credit inquiry is a record on your credit report that shows who accessed your information and when. There are two types of credit inquiries:
- Soft inquiries happen when you check your own credit. Soft inquiries, also known as soft credit checks, also happen when current creditors check your account or when other companies plan to send pre-approved offers.
- Hard inquiries are more serious. These appear when lenders check your credit when you apply for new credit cards, credit card limit increases, loans or mortgages. Hard inquiries can also happen when a collection agency is trying to locate you.
While soft inquiries do not affect your credit score, each hard inquiry can temporarily drop your credit score by a few points. Hard inquiries matter because they can indicate increased risk to lenders as they wonder why you want or need more credit.
Watch out: Hard inquiries can lower your credit score or be a sign of identity theft
If you notice an inquiry you don’t recognize, it could indicate identity theft. However, it’s possible that an unfamiliar credit inquiry on your report could be the result of multiple potential lenders pulling your report after you apply for a loan or mortgage. That said, issuers typically consider similar closely-timed inquiries as a single inquiry if they happen within a certain time frame (usually 45 days or less).
Check the dates of all inquiries listed as they should be removed after two years. You can always file a dispute and request a hard inquiry removal.
Why credit reports are important
Credit reports are an important snapshot of your financial health. Credit can make or break your chances at a mortgage and influences what kind of credit cards, insurances and interest rates you qualify for.
Having good credit can make it easier for banks and lenders to say yes to your credit applications, and you’re more likely to be offered lower interest rates or better loan conditions, like a low fixed-rate mortgage or a higher credit limit on a card. With good credit, landlords are more likely to rent you an apartment.
Bad credit means that you’re limited to fewer credit card options, you’ll miss out on the benefits that come with top-rated credit cards, and you’re likely to have higher interest rates and higher insurance premiums. Bad credit could mean being turned down for a rental, having to make a larger upfront payment or taking on a co-signer with good credit.
Understanding your credit report helps you know where you stand so you can work on building your credit score. Regularly reviewing your credit report at least once a year also gives you a chance to correct any errors to make sure your credit report is an accurate representation of your financial situation.
If you find errors, dispute them
If you find incorrect or outdated information on one of your credit reports, you can file a dispute with the credit bureau to get it updated. Mistakes happen and it’s important to catch them as incorrect information can affect your credit score, as well as any application processes that consider your report.
Check your credit report
You should get into the habit of checking your credit report for errors that could hurt your credit score or indicate identity theft. Potential errors include:
- Unfamiliar accounts and account numbers you don’t recognize
- Addresses you’ve never lived at
- Former spouses listed on credit cards, loans and bank accounts
- Incorrect reporting of account status, such as accounts incorrectly reported as late or delinquent
- Gather relevant documents to dispute credit report errors
Since disputes are reviewed on a case-by-case basis, you’ll need to provide documentation to support your claim. You will need to provide proof of your identity, including your Social Security number, date of birth and a copy of your ID (like your driver’s license or passport). Depending on the specific error, you may need to submit copies of documents to support your case, which could include bank and credit card statements, loans or death certificates.
Dispute credit report errors
Experian, TransUnion and Equifax all accept online disputes. You can easily fill in your information online or dispute by mail or over the phone.
- Equifax: You can dispute online or by mail to Equifax Information Services, LLC, P.O. Box 740256, Atlanta, GA 30374-0256. Dispute over the phone at (866) 349-5191.
- Experian: You can dispute information online or over the phone using the toll-free number included on your credit report. Dispute by mail at Experian, P.O. Box 4500, Allen, TX 75013.
- TransUnion: Call the toll-free number (800) 916-8800, dispute online or by mail to TransUnion Consumer Solutions, P.O. Box 2000, Chester, PA, 19016-2000. Make sure to complete and include the request form on the website.
Review the credit bureau’s response
The Fair Credit Reporting Act (FCRA) requires any information considered inaccurate, incomplete or unverifiable to be corrected or deleted from your credit report within 30 days.
The bottom line
Knowing how to read your credit report helps you understand how to improve your credit and maintain a healthy credit score. You need to monitor your credit reports regularly to catch potential identity theft and fraud. When you understand why it’s important to check your credit report and understand how to read a credit report, you can make more informed decisions about your spending and behavior as a borrower.