Personal profile section
Though you may think you need an expert to show you how to read a credit report, you can actually do it yourself with a little understanding. Each section focuses on different aspects of your credit standing. The personal profile section includes all reported information regarding your legal name(s), current and former addresses, date of birth, current and former employers, etc. Information in this section is gathered from many sources, such as credit applications and public records.
Keep in mind that this information is only as accurate as the creditor or person reporting it, and can sometimes be subject to human error. For example, in my credit profile, one of my previous addresses is actually the address of my former roommate for whom I cosigned so he could buy a TV from an electronics store. This incorrect information is relatively inconsequential, but it illustrates how easily mistakes can be made.
Credit summary
This section gives you a broad look at your overall credit status. When understanding how to read a credit report, this section can be the most helpful. All of your credit accounts are summarized by category, along with total amounts owed. Accounts are broken down according to the nature of the loan, such as real estate, revolving, installment, etc. Current balances are listed by category. Delinquencies and collection accounts are also listed in this section, if applicable.
Inaccuracies are often discovered in this section when comparing the three credit bureaus’ reports side by side. For example, my credit summary shows my home loan balance as $149,000 as reported by both Equifax and Experian, but TransUnion reports my real estate balance as $298,000. The reason for this is simple – my original mortgage was sold to another company. Instead of reporting that my original mortgage was transferred, TransUnion shows that I have two mortgages for $149,000 each. This erroneous information could hurt me if I was applying for a loan and the creditor looked only at TranUnion’s report.
Public records
Information in this section includes information about bankruptcy proceedings, court judgments, lawsuits, tax liens, overdue child support payments, and other public information. There really isn’t anything good that can be reported in this section, so you should be happy if this part of your credit report is blank.
Credit inquiries
Every time you apply for credit, an inquiry is reported from one of the credit bureaus. Having too many inquiries in a short period of time can hurt your credit score. The credit inquiries section of your credit report will list each inquiry by the name of the company and the date of the inquiry. In the past few years, non-credit companies and even some individuals can make inquiries into your credit under certain circumstances. For example, my credit report lists inquiries from Verizon Wireless for my cell phone, Quest for my home phone, and Dish Network for my satellite TV.
Credit history
When learning how to read a credit report, the credit history section can seem the most daunting. However, this section is the most informative, containing specific information about every account you’ve ever had, even if the account is currently closed. Information in this section stays on your credit report indefinitely. Each account will list whether the account is closed or open, your current balance in addition to your original or high balance, the date you opened the account, your monthly payment amount, your credit limit, and any amounts past due. If you’ve made late payments in the past, each account will list by the date(s) of occurrence, the dollar amount, and the number of days (30, 60 or 90) the payment was overdue. If the account was turned over to a collection agency, this will be indicated.
Credit score
Your credit score is simply a number that represents your credit worthiness or, in other words, the likelihood you will repay your debts responsibly. When learning how to read a credit report, it is important to understand the credit scoring scale. The credit scale goes from 350 to 850, with the higher number indicating better credit worthiness. “A” credit includes scores above 720. Remember that your credit score will probably be the main factor creditors will consider, along with your debt-to-income ratio.
By Aaron McCullough