How To Read Your Credit Report

René Nourse, CFP® |

Any financial advisor will tell you that you should pull your credit report and review it once a year. But what exactly does that mean? We are going to take a walk through a credit report so that you know what you are looking at and what information you need to pay close attention to as you review your financial status annually.

What are Credit Reporting Agencies?

There are three major credit reporting agencies in the US: Experian, TransUnion, and Equifax. Everyone is entitled to a free copy of their three credit reports – one from each of the credit reporting agencies – every 12 months under federal law.

Be sure to pull your credit report from all of the reporting agencies because the reports will have different information as creditors supply credit information to whichever agency they choose.

What Information is in My Credit Report?

A credit report is divided into four sections:

1. Identifying Information. This is information that identifies who you are. Look very closely to make sure it’s accurate – verify the spelling of your name and every digit of your social security number. Other information in this section may include current and previous addresses, date of birth, phone numbers, driver license numbers, your employer and/or your spouse’s name.

2. Credit History. Each account will include the name of the creditor and the account number. Also included will be:

  • Kind of credit (e.g., installment, mortgage, car loan)
  • Whether the account is in your name alone or with another person
  • Total amount of the loan, high credit limit, or highest balance on the card
  • How much you still owe
  • Fixed monthly payments or minimum monthly amount
  • Status of the account (open, inactive, closed, paid, etc.)
  • How well you’ve paid the account
  • Recent payment history and whether you paid as agreed each month
  • Comments such as account closed by consumer, internal collection, charged off or default

3. Public records. If you have a public record on your credit report, it means you’ve had a problem. The report lists on financial-related data such as bankruptcies, judgments and tax liens, all of which hurt your credit score.

4. Inquiries. This is the list of everyone who has asked to see your credit report. You initiate hard inquiries when you fill out a credit application. Soft inquiries come from companies that want to prescreen you for credit offers, potential employers, or current creditors monitoring your account.

If you see a mistake that needs to be changed on your credit report, you will need to dispute it with the credit bureau directly. The bureau will investigate your dispute by contacting the creditors, which have 30–45 days to respond. The item will show as disputed on your credit report until it has been resolved. It’s important to review the information carefully because studies show that 1 in 5 consumers have found errors on their credit reports. Stay on top of your credit report and financial reputation through careful annual review.