last updated July, 2008
Interpreting Your Credit Report
Although each credit reporting agency may have a slightly different format, all credit reports
contain basically the same categories of information. I just ordered all three of my "free credit reports"
from annualcreditreport.com in order to write this article and ensure the information was current,
and I was actually pleased at how easy it was to interpret them. Of course, being in the credit business, I strive (and have been successful thus far) to maintain
a good credit history and score thus your experience may not be quite as "pleasant". That said, the basic categories of information on your credit report
are as follows:
Personal Information: Your name, address, Social Security number, date of birth, and
employment information used to identify you. You may have multiple versions of your name (especially if you
are a married/divorced female who has changed her name) as well as nicknames and abbreviations. Your past and present
address(es) will be included as well.
Accounts Summary: These are your credit accounts. Most lenders report on each account that is established with them.
There are essentially three different types of account classifications (plus the all-encompassing "other" category) as follows:
- Mortgage Accounts: These include first mortgages, home equity loans, and any other loans secured by real estate that you own.
- Revolving Accounts: Revolving accounts are charge accounts that have a credit limit and require a minimum payment each month. This includes most credit cards.
- Installment Accounts: Installment accounts are credit accounts in which the amount of the payment and the number of payments are predetermined or fixed, such as a car loan.
Satisfactory Accounts, or Accounts in Good Standing: All three of the major credit reporting agencies (TransUnion, Equifax, Experian) appear to segregate "positive" accounts from "negative" ones,
thereby making the interpretation of your report a little easier. The Equifax report gives a nice "Credit Summary" which provides a one-page, easy to review snapshot of all your open accounts, as well as some
useful summary statistics (such as total debt by account type, debt to credit ratio by account type, and length of credit history).
Inquiries: When you apply for a loan, you authorize your lender to ask for a copy of your credit report. This is how inquiries appear on your credit report.
The inquiries section contains a list of lenders who accessed your credit report within the last two years. Typically you will see a list of "voluntary" inquiries, spurred by your own requests
for credit, followed by a list of "involuntary" inquiries. These result from creditors who order your report prior to sending you one of those "preapproved" offers for credit, and don't affect your credit rating.
Negative Items: Lenders report delinquency information when you have missed a payment. Credit reporting agencies also collect information on overdue debt from collection agencies, and public record
information from state and county courts. Public record information may include bankruptcies, foreclosures, tax liens, garnishments, repossessions, charge offs, legal suits and judgments.
Credit Report Examples to Review
We found a great site which provides you a sample of a blank credit report; thus, why re-create it here? At the "Freddie Mac" website, you can use this document as a guide or key to understanding the primary elements of a credit report.
Simply roll your mouse over any blue underlined word to see a description for that section of the credit report. After the credit report table, there is a very complete listing of TransUnion Credit Report Codes
to further increase your understanding of how to read a credit report and a link to a PDF file containing three sample credit reports.
Here are three pretty thorough "tutorials" on interpreting the credit reports generated by each of the big three reporting agencies. The business name is Accurate Credit Bureau and it appears that their charter is
to provide tenant credit reports, eviction reports, and background checks nationwide for landlords, property managers, and real estate agents; and employee credit reports, DMV records, criminal background checks, and employment reference verification for businesses across the country. Their
tutorials do seem to be pretty thorough and perhaps helpful, as follows:
Hopefully, all of the links above will provide more information regarding interpreting or "decoding" a credit report than you will ever need!
Common Questions
How do I know if I have late pays, and how late am I? All 3 reports seem to be pretty consistent on this. They use a little "square" with either 30, 60, 90, or 120 in it and you don't want anything but a "zero" underneath that symbol. You want to see "OK" in green shown, or under "status", the notation "never late".
What does "charged off" "bad debt" or "placed for collections" mean? This means that the acount went longer than 120 - 180 days without a payment from you. At this point, the credit card company decided that the debt was not going to be collected from you, and decided to "write it off". The company took the IRS tax deduction and sold the debt to debt collectors. Many of the recent real estate "short sales" may end up as charge-offs on consumer's credit reports.
What Does "Account closed by credit grantor" mean? The credit card company was worried that you would default on the debt and shut down your ability to access any more of your credit line. This sometimes happens if you are defaulting on other cards (called universal default).
What does "Account Balance" mean? Fairly straightforward, this is the amount owed on the loan, whether it is a credit card balance or the balance of a home mortgage or installment loan.
What does "High Balance" mean? Also fairly straightforward, this is the most you ever owed on the loan, whether it is a credit card balance or the balance of a home mortgage or installment loan.
What is "Date of Last Activity" (DOLA)? This will be specified on the report as "last updated" or "last activity" and basically is the last date that any account activity occurred, typically the last time you made a payment.
What is a negative item? We pretty much addressed that above and in the external links, but here is more information on negative items and how to address them.
How do I tell if something is in collections?
GOOD LUCK!!
Do you have a question you feel we haven't answered?
For a small fee, you can talk to a counselor on the phone or Buy the Book!
|
