Credit Reports and Scores: How to read a credit report?

Ok, so now you are having your credit reports in your hand and look at it there are an awful lot of numbers, abbreviations and terms that must have never be seen by you before. There are trade lines, charge-offs, account review inquiries, so now the question is how do you read this thing?

I must tell you first that  in the United States there are three major credit-reporting agencies: Experian, TransUnion and Equifax.

GuyReadingReport

Annually everyone is entitled to a free copy of their three credit reports, one from each of the credit reporting agencies and that has happened only due to a new federal law.

Get all of them

As it is a voluntary system so the reports will have different information, and the decision is made by the creditors to whichever agency they want to subscribe if any at all.

Maxine Sweet, who is the vice president of consumer affairs at Experian, insisted upon ordering the report directly from the credit bureau instead of asking any person who works at a bank to get  one for you. Those credit reports are written for those people who work in the credit industry. The one that you get from the credit bureau is particularly designed for consumers.

She further said that the information is the same, but it’s much more consumer friendly.

Well, they are not quite the same. But Sweet says that the differences are only made to make the report easy to read for consumers. The report that is sent to a lender will only mention the credit bureau member numbers of your creditors and it will not have the complete list of every company that’s pulled your credit information for promotional purposes, like pre-approved credit card offers.

credit_score_chart

It has been said by John Ulzheimer, business development manager for myfico.com,the Web site of the Fair Isaac Corporation, that if you compared the two reports side by side, the report that is designed for consumer will have a couple more pages of information. The Fair Isaac Corporation is the creator of the FICO score. FICO score is the widely known credit scoring model by which a person’s credit risk is determined.

Understanding the Setup

Basically a credit report is  divided into four sections:

Identifying information is just the information that is used to identify you. You should look at it closely to ensure that it is accurate. Sweet says that it is a usual thing in there to be two or three spellings of your name or more than one Social Security number. That usually happens because someone reported the information that way. The variations will remain stay on your credit report, if it’s reported wrong, we leave it because if it is changed it might mess up the link. So you don’t need to be concerned about variations.

Your current and previous addresses, your date of birth, telephone numbers, driver license numbers, your employer and your spouse’s name might be included in other information.

Your credit history will be the  next section. Sometimes, the individual accounts are referred to as trade lines.

The name of the creditor and the account number will be included in each account, which may be scrambled for security purposes. Possibly you might have more than one account from a creditor. Many creditors have more than one kind of account, or if you move from one place to another, they will transfer your account to a new location and they will assign a new number to you. The following things are also included in the entry:

  • The kind of credit is mentioned there (installment, such as a mortgage or car loan, or revolving, such as a department store credit card);
  • It is mentioned there that whether the account is in your name alone or with another person;
  • Total amount of the loan, high credit limit or highest balance on the card is also written there;
  • How much you still owe;
  • Your fixed monthly payments or minimum monthly amount is written there;
  • Status of the account is mentioned in report whether it is open, inactive, closed, paid, etc.;
  • It is also written there that how well you’ve paid the account.

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