When reading your credit report you want to understand to all sections, you have four sections breaking down your credit report. You have your personal information section, your credit history section, public records section, and your credit inquiries section. You want to be able to know “how to read” all four sections when reviewing your credit report. Understanding your credit report will help you correct any derogatory remarks reporting to your report.
Personal information is important to review! In this section you’re looking for your basic info. Full name, date of birth, current and most previous addresses, employment and marital status. Tedious information such as your basic information can have a simple error and throw off your entire credit pie chart. Trust me! It’s happened to me. When I first started building my credit, I noticed my scores were only increasing for Transunion and Equifax. I wasn’t understanding why for an entire year my Experian score was at a 4 point score! Nothing more, nothing less. It wouldn’t increase no matter how many times I made on time payments and didn’t apply for new credit lines. When I requested a copy of my credit report, I noticed my date of birth was reporting incorrect with Experian. My birth date was off by ONE year, I was born on March 23,1993 and it was reporting March 23, 1992. A tiny error like that caused the bureau to not report any of my credit history. Once I corrected my birth date with the bureau, my score began to increase and my credit history was being reported.
Understanding your Credit History:
This is VERY important when it comes to reading your credit report. Understanding what exactly is being reported on your credit report, this section of your report would be considered the “meat” of your report. Here you find all payment history, if any late or missed payments done, your account status, whether it’s closed or currently opened, each account balance, and the length of the account. The older the account reports, the better it looks on your credit report. That is why I always recommend to my clients NOT to close credit lines. Closing a credit line can affect you in a negative way, showing less credit history.
Public records… I would hate a public record on my credit report! In this section of your report, you want to always pay close attention. Any account found in this area would never be a surprise but always take the right steps so you do not have an account reporting in this section! What’s a public record? This section would report any public records you may have with any state or county court such as any bankruptcy you may have filed with your county court, foreclosures, tax liens, child support collection, and/or any judgments.
When applying for a new credit loan or line, you authorize the lender to request a copy of your credit report from a credit bureau. You will see a section for your “hard inquiries”, the only inquiries that count toward your score are the ones that result from your applications for new credit. It is important you understand that there are two kinds of inquiries, hard and soft inquiries. Soft inquiries do not affect your credit, with a soft inquiry only YOU can see these reported inquiries. Your hard inquiries can affect your score up to 12 points and is seen by any lender that pulls your credit report. I always recommend to my clients DO NOT APPLY FOR A NEW LINE OF CREDIT just to save 10%! Whether you are accepted or declined for the new credit line, the inquiry will be reported and the inquiries remain on your report up to two years!
So, the next time you get a copy of your credit report pay close attention to this basic information provided above. Remember there are three different credit bureaus, we have Equifax, Experian, and Transunion. You want to make sure ALL THREE credit bureaus are always reporting all information correctly. Next week, we’ll discuss building credit!