How to Read Your Credit Report

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For those wondering how to read your credit report, like most financial matters, it can be somewhat confusing at first.

What is a Credit Report?

A credit report is a type of record that outlines the financial history of an individual. Lenders use this information to determine both the amount of debt an individual could reasonably take on and their likelihood of paying it back, these two factors make up an individual’s “creditworthiness”.

In the United States, there are three main credit reporting agencies that keep these records. Equifax, Experian, and TransUnion. But how exactly does a person gain access to their credit report?

Finding Your Report

In the United States, individuals are entitled by law to receive a free copy of their credit report from each of the major reporting companies once a year. This can be done online, by phone, or by mail. Consumers can also opt to receive all three reports at the same time, or, they can order them each separately, allowing them to see changes to their score throughout the year, to see, for example, the effect any debt programs may have had on their score. But, once someone has received their report, what exactly should they be looking for?

What’s in a Credit Report?

A person’s credit report can include many different facets of their financial life, although whether a particular account shows up will depend on whether it’s been reported to the particular agency that generates the report.

Some creditors will report the information to only 1 or 2 of the bureaus, while some will report to all 3. Information that can be reported includes, but is not limited to, a person’s credit card accounts, debt programs like consolidation or settlement, loans, amount of debt owed, previous bankruptcies, and even whether they pay their bills late, and, if so, how often.

Check For Accuracy

The first thing someone should do upon receiving their credit report is to make sure that the information in it is correct. According to the Federal Trade Commission, 20 percent of people have at least one error on their credit reports.

While not as common as balance or accounting errors, information about an individual’s identity, like their phone number, address, name, or Social Security Number, could be listed incorrectly.

Common errors could involve the status of any credit accounts an individual may have, such as a credit card debt that they’ve paid being listed as an active debt. It’s also possible that someone else’s debt could be listed on another person’s credit report, due to having either the same or a similar name.

Other potential errors that could be found on a credit report, like multiple entries for the same debt programs, false reports of late payments, and debts listed due to identity theft, can harm a person’s credit score and should be reported to the agency responsible for the error.

Disputing Errors

Disputing errors that appear on an individual’s credit report can be a fairly complex task, but can help to raise an unfairly impacted score.

To do so, an individual first needs to prepare an explanation of the inaccuracies in the report, gather any supporting documentation they may have and submit that information to the agency responsible for the inaccuracy. This process can be done either online, by mail, or by phone.

After investigating the dispute, the credit reporting agency will determine the veracity of the claim and will correct the information if it is found to be in error.

Key Facts

While understanding a credit report can be difficult at first, remembering certain key facts can make it easy to navigate the complex financial information within. And if you were wondering how to read your credit report, now you know.