When you start your credit-building journey, you’ll often hear advice saying you should perform a credit report check at least once a year. Your credit report is a detailed record of your credit activity. Understanding how to interpret your credit report can help you take control of your finances, improve your credit score, and spot potential errors or fraud. Here are seven key insights to help make sense of a credit report.
Table of Contents
Verify Personal Information
Your credit reports from all three major bureaus begin with personal details such as your name, address, date of birth, and Social Security Number (SSN). This section may also include previous addresses and current and former employment. Your employment history may not be completely up to date—some lenders may list the employer name when you provide your account information—but this won’t impact your credit score. While this information does not impact your credit score, its accuracy matters. Always make sure that all the information included is specific to you. A misspelled name, incorrect initials, outdated address, or inaccurate SSN may be a sign that your credit report has been mistaken for someone else’s. This can happen with two people who have similar names or SSNs. Incorrect personal details may also signal identity theft.
Examine Active and Closed Accounts
The credit history section of your credit report typically features all active and closed credit accounts, including student loans, credit cards, personal loans, home equity loans or lines of credit, auto loans, and mortgages. Look for any accounts that you didn’t open. Fraudulent accounts could be a sign of identity theft and may do serious damage to your credit. Dispute any accounts that you don’t recognize.
Some people use services to report rent or utility payments to credit bureaus to build a positive payment history. If you’re using one of these services, make sure your payment information is included in this section.
Review Payment History
Your payment history plays a major role in determining your credit score, so making timely payments is an important step toward improving your credit. However, reporting errors may negatively impact your credit score even when you’ve made payments on time. Look for any indications of late and missed payments and verify payment dates against your bank statement. If you spot any incorrect information related to late or missed payments, you can dispute it and have it corrected.
Confirm Account Balances
Incorrectly reported balances can make it look like you owe more than you really do and raise your credit utilization. A high credit card balance may also be a sign of credit card fraud. If a potential lender spots an unusually high account balance, they may assume you can’t take on any more debt and reject your credit application. Refer to your loan or credit card balance statements to confirm that all the balances in your credit report are accurate and up to date.
Monitor Public Records
Public records like bankruptcies, foreclosures, and repossession remain on your credit report for 7 to 10 years. When a potential lender sees bankruptcy on your credit report, they may not feel confident about your ability to repay what you borrow. Ensure that all the public records in your credit report are yours. Repossessions and foreclosures should fall off your report after seven years, while bankruptcy may take 10 years. You can dispute outdated public records on your credit report to improve your credit profile.
Track Credit Inquiries
Your credit report features two types of credit inquiries:
- Hard inquiries: These occur when a lender checks your credit for a loan or credit application. Too many hard inquiries in a short period can lower your credit score.
- Soft inquiries: These happen when you check your own credit or when a lender pre-approves them for an offer. Soft inquiries do not affect a credit score.
Unfamiliar credit inquiries may suggest identity theft. Verify recent credit pulls and request a fraud alert or credit freeze if you suspect foul play. If you see any incorrect information in one of your credit reports, you can contact the credit bureau and dispute the information. All three credit bureaus let you dispute online, over the phone, and by mail.
Disclaimer: This content is sponsored by myFICO and is provided for informational purposes only. The information shared here is not intended to serve as financial, legal, or credit-related advice. Readers are encouraged to consult with their personal financial advisors or credit professionals to assess their specific situation. To learn more about myFICO’s services, including credit scores and monitoring tools, please visit the myFICO website or reach out to a myFICO representative.
