How to Read Your Credit Report
In a data-driven world, your credit record is your reputation, and false information can have deep repercussions. Bad credit can stop a loan cold. A landlord can refuse you a lease. An insurer can raise your premium.
For these reasons—and especially after the recent Equifax breach—it makes sense to get copies of your credit reports from each of the major credit bureaus—Equifax, Experian and TransUnion—and carefully review them at least annually, says Bruce McClary, spokesman for the National Foundation for Credit Counseling, a network of nonprofit financial counselors.
Once you have the report, though, figuring out what to look for—and deciphering descriptions on the credit reports—can be downright confusing.
Here are some tips.
Identifying information. Look carefully at the top of your credit report—what industry folks call the header—to make sure it correctly identifies who you are. This includes your name, current and past addresses, and possibly current and past employers.
Glaring errors—a totally wrong address, for example, could be a sign of identity theft or an indication that a credit bureau has mixed your file with that of another person, says Thomas Nitzsche, a credit educator at Money Management International, a nonprofit credit counseling organization.
Minor mistakes are probably harmless but still worth correcting, McClary says. The reason: When you go to pull your reports, credit bureaus ask questions to verify your identity. The correct answers are culled from your credit report, so if the information is inaccurate, you might be blocked in the future from accessing your reports.
What to do. If you see mistakes in the header of your credit report, file a dispute with the credit bureau, McClary says. The Consumer Financial Protection Bureau lists how to submit disputes with each of the major credit bureaus, Equifax, Experian, and TransUnion.
Credit card accounts and loans. For each account you have, you’ll see multiple fields of data, including the type of credit listed. You’ll see whether it’s a car loan, for example, or a revolving account like a credit card. Also listed will be your name as well as any other names listed on the account, the total amount owed, the credit limit provided to you, and the status of the account—whether it’s open or closed. The report will also list the monthly payment owed, and a month-by-month record of whether you paid on time or if the account was overdue by 30, 60, or 90 days, or more.
What to do. Look carefully at the creditor names on your report. Sometimes the names listed may not seem to correspond to any credit cards or loans you have. That can happen if one lender bought another, say, or you didn’t directly interact with a card issuer—such as when you sign up for a credit card in a store, Nitzsche says.
“It can be a game of process of elimination,” he says. Other information provided, like the date the account was opened, might offer clues, Nitzsche says.
Also, look out for duplicate accounts—they can make you appear over leveraged to a potential lender. Keep in mind, though, that duplicates may be legitimate, such as when you refinance a loan or close and then immediately re-open a credit card after it’s stolen. “You have to look closely to make sure it’s not an error,” McClary says. Only one of the accounts should be marked as active. If you’re not sure whether the second account is a mistake, get in touch with the creditor to clarify.
If any of the information is inaccurate, especially the record of on-time payment, file a dispute with both the credit bureau and the creditor, McClary says. Correcting any mistakes with the creditor is important so that the creditor doesn’t continue sending wrong information to the credit bureaus.
The CFPB lists how to submit disputes for each of the credit bureaus, Equifax, Experian, and TransUnion. Also, correct any mistakes with the creditor just in case it is sending wrong information to the credit bureaus....