How to Read and Understand Your Credit Report
It’s a good idea to regularly review your credit report. Doing so can help ensure that the information used to calculate your credit scores is accurate and up to date. It can also alert you to fraud or identity theft.
Unfortunately, understanding your credit report can sometimes feel like a challenge — especially if it’s the first time you’re doing it. Below, we’ll explain how to read a credit report, as well as highlight some common credit report errors to look out for.
What Is a Credit Report?
Your credit report contains a large amount of information about your financial life and payment history. If you have credit cards or loans, for instance, those accounts and how you pay them are included in your credit report. Often, you’ll have more than one credit report, as creditors are not required to report to every credit reporting company.
Credit card issuers and lenders can pull these reports and review them in order to determine your creditworthiness. They will rely on this information to make a decision on whether to loan you money, as well as the terms they’ll offer if they do.
Who Compiles Credit Reports?
Credit reports are created by three national credit reporting agencies: Equifax, TransUnion, and Experian. The information the credit bureaus compile in credit reports comes from creditors — like lenders, credit card companies, and other financial companies — that submit information on your accounts and payment history to the bureaus.
Who Can See Your Credit Report?
Your credit report is accessed whenever a lender (or an employer or landlord) conducts what’s known as a hard credit inquiry. This is when a business accesses your credit report to make decisions about your creditworthiness, likely in order to make a decision about extending a loan (or a job or housing).
Hard credit inquiries will appear on your credit report, so you should recognize any credit inquiries that appear. They may also subtly affect your credit score. Multiple inquiries in a short period of time may signify to lenders that you’re seeking multiple loans, which may bring up concerns about your financial stability.
Your credit report can also be accessed by consumers (like you). The Fair Credit Reporting Act requires each of the credit reporting companies to provide you with a free copy of your credit report, at your request, once every 12 months. Your credit score will not be impacted when you request a copy of your own credit report.
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How to Get a Credit Report
Each year, you have the right to ask for one free copy of your credit report from each of the credit bureaus. There are a few ways you can request it:
• By visiting AnnualCreditReport.com
• By calling (877) 322-8228
• By downloading and filling out the Annual Credit Report Request form, and mailing it to the following address:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281
You also can request credit reports from consumer reporting companies, though these may charge a fee. Additionally, you’re eligible to request free reports beyond your one per year under certain circumstances, such as being denied credit or due to potential inaccuracies because of fraud.
Also know that you can only check your own credit report — checking someone else’s credit report is generally illegal.
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Reading Your Credit Report
When you get your credit reports, it’s a good idea to read each section closely. Here’s a rundown of the sections you’ll typically find included, so you’ll know what to expect and thus how to read a credit report.
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Personally Identifiable Information (PII)
This section of the report is used to identify you. It contains basic information like your name, address, and place of employment. You may also find previous addresses and employer history listed here. Your employment history doesn’t affect your credit score. Rather, it’s included on your credit report only to verify your identity.
When scanning this area you’ll want to make sure that your name, address, and employer match up. Any incorrect or unfamiliar personally identifiable information (like company names you don’t recognize or employers you never worked for) may be a sign of identity fraud.
|Personally Identifiable Information Included in Your Credit Report|
• Name(s) associated with your credit
• Social Security number variations
• Address(es) associated with your credit
• Date of birth
• Phone numbers
• Spouse or co-applicant(s)
• Current or former employers
• Personal statements, such as fraud alerts, credit locks, or power of attorney
This section summarizes information about the different types of accounts you have, including credit cards and lines of credit, mortgages and other loans, and any accounts that have been sent to collections. For each account, your credit report will include the date the account was opened, its balance, its highest balance, the credit limit or loan amount, payment status, and payment history.
As you read this section, make sure that all the information looks familiar. It’s not unusual for a credit report to have slightly dated information, such as a higher balance because you just paid off a bill this month. However, all information should seem recognizable. In particular, you’re looking for:
Late payments that do not align with your records
Balances that do not match your records
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|Credit Summary Information Included in Your Credit Reports|
• Account name
• Account number
• Account status
• Date opened
• Account type
• Credit limit or original loan amount
• Payment status
• Payment status date
• Past-due amount
• Monthly payment
• Late payments
• Consumer’s association with the account
• Account terms
• Comments from the creditor or at the consumer’s request
• Consumer’s statements
Contact information for the creditor
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The information in this section is pulled from public records and may include debt collections or bankruptcy information.
If you have any debt collections and bankruptcy on your record, it’s important to remember that they won’t stay there permanently. The following statutes of limitations apply to different types of debt, restricting how long the information will remain on your credit report:
• Chapter 13 bankruptcy: Removed seven years after the filing date
• Chapter 7 bankruptcy: Removed 10 years after the filing date
• Late payments: Removed seven years after they occur
• Payment defaults: Removed seven years after they occur
If you see information that’s not familiar, you’ll want to flag it, since this could be a sign of identity theft. You may also want to flag any information that is still on your credit report after the statute of limitations has expired.
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Credit inquiries list all parties who have accessed your credit report within the past two years.
These could be from lines of credit you opened, such as applying for a credit card, or from applying for a loan.
Both hard inquiries and soft inquiries will appear, though they have different impacts on your credit — hard inquiries will affect your credit, whereas soft inquiries will not. You can distinguish the two types of inquiries based on how they appear on the report:
|How a Hard Inquiry Will Appear||How a Soft Inquiry Will Appear|
|Business name||Company name|
|Business type||Inquiry date|
|Inquiry date||Contact information|
|Date inquiry will be removed|
|Contact information provided by the creditor for the account|
It’s a good idea to make sure you recognize any recent credit inquiries, as they can be a red flag for identity theft.
Why Credit Reports Are Important
Your credit report can play a critical role in determining your financial future. That’s because creditors will refer to your credit report to decide whether to approve you for a loan or a credit card and, if so, what terms they’ll offer you, including the interest rate. In other words, your credit report will help determine whether you’ll get the auto loan you need to purchase a new car, or the mortgage necessary to purchase a home.
It’s not just creditors looking at your credit report either — landlords, insurers, potential employers, and even phone and cable companies may look at your credit report as part of their vetting process. This is why it’s so important to understand what information your credit report contains, so you can know what information these potential parties can learn from viewing it.
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What Information Is Not Found on Your Credit Reports?
One surprising piece of data that you may be surprised to find out credit reports do not include is your credit score. Beyond that, your credit report will not contain the following information:
• Employment status
• Marital status
• Spouse’s credit history, if applicable
• Assets, such as bank account balances, investments, or retirement accounts
• Any 401(k) loans
• Public records outside of bankruptcy
• Medical information
• Expired information
• Race or ethnicity
• Religious beliefs or information
• Political affiliates
What To Do If You Find Errors on Your Credit Report
None of the information on your credit report should look unfamiliar. In fact, one of the main reasons you want to read your credit report is to make sure that your credit report matches your records.
But sometimes, there can be discrepancies. If you detect an error on your report, such as a payment incorrectly reported as late, you’ll want to file a formal dispute. You’ll need to dispute credit report errors with both the credit reporting company and the entity that provided the information (such as a credit card company).
When writing a dispute letter, you’ll want to include:
• A clear explanation of what is wrong in the credit report.
• Supporting documentation showing the information is inaccurate (such as a copy of a paid bill).
• A request for the information to be fixed.
By law, the credit reporting company must investigate your dispute and notify you of its findings.
If you notice an error that suggests identity theft (such as unknown accounts or unfamiliar debt), it’s a good idea to sign up with the Federal Trade Commission’s (FTC’s) IdentityTheft.gov site in addition to alerting the credit bureaus. The FTC’s tool can help users create a recovery plan and figure out next steps, which may include placing a security freeze on your accounts.
It’s easy and free once a year to gain access to your credit reports from the three major bureaus. Taking advantage of this service can help you maintain good credit and good overall financial health.
Reviewing your credit report can give you a chance to correct any errors, and make sure your credit report is an accurate representation of your financial situation. It can also alert you to any fraudulent activity. In addition, reading your credit report can help you understand how creditors see you as a borrower and cue you into any potentially problematic information that may lead to a lower credit score than you would like.
Maintaining a solid credit score is key to gaining access to lending opportunities, particularly valuable ones like rewards credit cards. The SoFi credit card, for example, offers cash-back rewards on all eligible purchases. You can then use those rewards to invest, save, or pay down eligible SoFi debt.
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When should you check your credit report?
The Consumer Financial Protection Bureau (CFPB) recommends checking your credit report at least once a year to ensure there are no errors and that all information is up-to-date. You might consider checking them even more frequently than that though to have the most accurate picture of your current financial situation.
What do the numbers mean on a credit report?
Your credit report may contain a variety of different numbers. This can include your name identification number, your Social Security number, the IDs for addresses associated with your credit, phone numbers, account numbers, and more. It can help to go through section by section if you’re unclear as to what a particular number means.
What should I look for on a credit report?
When reading your credit report, you’ll want to look out for any changes to your personal information, such as changes to account details, inquiries, or data available in public records. Keep your eye out for any errors or anything that otherwise seems amiss, as this could be a sign of fraud.
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