How To Read A Credit Report
Since you recently purchased copies of your credit report, you have already begun the credit repair process. However, it is extremely important that you understand how to read a credit report, and then interpret the information that is being provided to you. Credit reports are broken into four individual portions, each of which is a vital part of your credit’s “big picture”. Below, we have broken down these sections, and explained what each piece of information means to you.
Personal Information
Generally listed first, your credit report’s personal information section will give you a clear picture of what lenders see when they look at your application. While not as essential as your credit history section, which will be covered shortly, having accurate personal information can make or break any credit application.
You can expect to see the following information on your credit report’s personal information section:
- Full Name
- Current and Previous Addresses
- Current and Past Employers
- Date of Birth
- Social Security Number
- Spouses’ Name
Why is this information so important? For one, your address and employment history will give potential creditors an idea of your personal and financial stability. Many times, people with many previous addresses, several employers over a short period of time, and inaccurate file information will be seen as “high risk” applicants.
Public Records
The public records portion of your credit file provides a good indication of your lifestyle and past history to potential creditors. Anything that is public court record will usually be included in this section, including all of the following and more:
- Bankruptcies
- Liens
- Judgements
- Garnishments
- Felony Convictions
Credit History
By far the most important part of your credit report, your credit history is the primary determining factor on any credit application. Not only are open accounts shown, you can also expect to see closed accounts, payment history, and notes from each of your creditors, which are known as trade lines.
Your credit history will include all of the following and more:
- Loans
- Leases
- Mortgages
- Credit Cards
- Collection Accounts
- Charge-Offs
Inquiries
The inquiries portion of your credit report shows everyone who has accessed your credit file in recent history. For most credit applications, your credit report will show a “hard” inquiry, which is an inquiry that can be seen by everyone who accesses your credit file. “Soft” inquiries are only viewable by you, and are generally the result of pulling your own credit, or marketing inquiries for pre-approvals, loan offers, etc.
Why are inquiries important? First, most inquiries will lower your credit score by a measurable amount. Also, potential creditors never like to see dozens of credit inquiries, as they indicate an applicant that has been actively seeking more and more credit. Creditors know that this is generally the result of looking to open too many accounts, or, if inquiries do not correspond to open accounts, they generally indicate an applicant being declined by several other lenders.