How To Read Your Credit Report

Lyn Ridley - 2020-09-08T21:00:00.000Z

The various sections on your free annual credit report contain important information about you, your debt situation, and your risk of defaulting on your credit accounts.

In this article we’ll examine each section of your report, find out what it contains, and share some strategies that will help you optimize your credit score.

Personal Information

The first section of your credit report contains a summary of your personal details. It’s essential to check these for accuracy because they’re used by lenders to verify your identity.

You find the following details in this section.

Your name (your first middle and last names will appear at the beginning of your report)
Date of birth
Social Security number (it’s very important to verify that this number is correct)
Residential address (every address you have stayed at over the past two years will appear in your report)
Phone number (this will be the most recent phone number you supplied on a credit application)

Employer History And Information

In this section, you’ll find details about your most recent employer - including the business name, address, and contact details.

Employment history plays an important role in credit applications.
Lenders tend to prefer applicants who are employed full-time or are self-employed with regular income.

It’s important to check that the information in the section is accurate and current. Your lender may use your employment information to verify your identity when they process your credit application.

Consumer Statements

If you’ve ever questioned an incorrect entry or disputed something on your credit report this is the section where a record of your correspondence will appear.

You won’t find a copy of your dispute letters in this section, but they’ll be listed and itemized for lenders to see. This has several functions:

Lenders get to hear your side of the story. A late payment or default could sway their lending decision less if you had a very good reason for your actions.
You can check your disputes for accuracy. You’ll want to make sure that the disputes listed were actually made by you and that they appear with the right credit account details associated with them.

Account Information

This part of the report is very important for lenders because it lists all your credit accounts and indicates whether you’ve been paying them on time.

You’ll find the following details in this section:

Open accounts - These are the credit products you’re currently using.
Closed accounts - These are old accounts that you’ve paid down and canceled.
Payment history - A payment status appears next to each account and you’ll want as many “paid as agreed” entries as possible.
Account balances - The amount you owe on each credit product.
Credit utilization - This is the percentage of your total available credit that you’re using. It’s best to keep it under 30%.
Loan payment status - Installment credit has its own payment reporting heading. Lenders will be keen to see that you can pay down your loans in full.

The information listed above gives lenders a very clear snapshot of your credit situation between how much you owe and how well you’re repaying it.

Judgments And Bankruptcies

Of all the negative marks that appear on a credit report, these have the biggest impact on your FICO score and they can lower your chances of being approved for a credit card or loan.

The section of your report that deals with these items may also refer to them as public records - that’s because they are issued by the court system.
These items can stay on your credit record for seven years or more and have a significant negative effect on your score - you could lose 100 points or more due to bankruptcy.

Inquiries

These are special requests that lenders make to view your credit report - usually when you make a formal credit application.

There are two types of inquiries listed on your credit report.

Hard inquiries - These are requests for in-depth information that can cause your FICO score to drop by several points.
Soft inquiries - When you pre-qualify for credit it’s usually because a lender has done a soft inquiry. Less information is provided by the bureaus and your credit score won’t be affected.

It’s important to check for unauthorized hard inquiries and follow them up. A lender or employer may only conduct this type of inquiry (also known as a hard pull) with your permission.

Conclusion

Your credit score contains vital information about your debt situation and the payment status of your accounts.

Checking your credit balances and payment information and keeping the amount you owe as low as possible - while paying your installments on time - will help boost your score.