How to Read a Credit Report

A credit report is an essential tool for monitoring your finances. Unfortunately, not many of us go into adulthood knowing how to read one or what to do with the information listed there. What can you see on a credit report? What happens if there is an error? Learn more about how to take charge of your credit through receiving and reviewing regular reports.

What’s in a credit report?

A credit report can tell you many things, and all of the data is broken down into categories. While the order and the detail for each of the three credit reporting agencies' reports are slightly different, here’s what you can expect.

Personal information

Any personally identifying info is listed in one section and usually includes your:

●     Name

●     Date of birth

●     Social Security or TaxIdentification Number

●     Address, including previous addresses

●     Phone number

Action item: Look over this section very carefully. Report any errors to the credit reporting bureau so that they can change them. Be aware that any past names you’ve used will be included here and are OK to have listed.

Maiden names, nicknames, or names with initials are common variations that shouldn’t cause alarm—unless you never used those names formally on an account or application. Seeing a nickname listed that only you use could hint at someone using the nickname for opening accounts without your knowledge.

Employer history

Most, if not all, of the places you’ve worked appear here. It is sometimes in its own section, but it may also be included in the personal information section. You’ll see company names, positions, work addresses, and phone numbers.

Action item: Do you see an inaccuracy in your employment history? Details such as a missing phone number or misspelled employer name aren’t anything to worry about. You want to be sure that the basic info, such as the place you worked, is correct. This information is used to verify your identity when applying for credit, so a typo won’t matter.

If you see an unfamiliar role, however, reach out to correct the error and make sure someone isn’t using your information for identity theft.

Consumer statements

Did you know that your credit report includes any notes that you’ve filed? If you tried to get a late payment removed and were unsuccessful, for example, a statement from you can appear alongside the account note. These aren’t common, but you should still look this section over.

Account information

This is likely the largest portion of your credit report, and it lists all of your accounts. You’ll see everything including student loans, credit cards, and mortgages here. Under each account, look for:

●     Account status: opened or closed

●     Dates of activity, including when the account was opened and closed

●     Payment history

●     Current balance of installment and revolving accounts

●     Credit limit or loan amount

Action item: Since there is so much data here, you should read it with a list of red flags in mind. Note any of the following:

●     Wrong credit limit or balance amounts

●     Accounts you don’t recognize

●     Accounts you closed but are showing open

●     Late payments that you know you paid on time

●     Data you successfully had removed but is back again

If any of these things stand out, contact the credit bureau immediately.

Public records

Although public records are available to the public, you may not know if you have any on you personally. That’s one of the reasons credit reports are so handy. Any bankruptcies, tax liens, civil judgments, or foreclosure actions will show up here. Know that these can seriously affect your credit, so if one comes as a surprise, don’t put off investigating it.

Credit inquiries

Any time someone checks your credit report to consider you for new credit or to keep you as a customer, it’s considered an inquiry. Although both hard and soft inquiries show up on your credit reports, hard inquiries occur when you apply for credit with potential lenders, some types of employment, or apartment leases. Usually, you’ll know about a hard inquiry, so if you see one on the report that doesn’t look familiar, you should follow up.

Action items: Hard inquiries may drop your credit score by a few points, so monitor this section of your credit report closely. An unfamiliar inquiry can also be a sign that someone is trying to open credit under your name or with your Social Security Number, so take any surprise inquiries seriously. Hard inquiries usually drop off your report after two years.

If you see errors, dispute them

Now that you know what to look for, what can you do if you see something amiss? First, get as much documentation as you can to back up your dispute. It’s not enough to say to the credit reporting agency that you paid off a credit account. You'll need to provide evidence, such as a paid-in-full statement with the account number, to prove that there truly is an error on the report.

Once you submit your claim and documentation to the reporting agency, it has 30 days to look into it and respond. Be sure you address the inaccuracy with the reporting agency that provided the inaccurate report directly.

Why are credit reports important?

While credit reports help lending institutions extend credit and decide on an interest rate, their importance in your life goes much beyond that. Yes, a bank will look at a credit report and make a determination, but credit reports serve other roles, as well.

The information on your credit report can be used by government agencies to verify your identity. When setting up an online account with the IRS for paying taxes, for example, the agency will try to verify who you say you are by asking about information from your credit report, such as the bank who issued you auto loans. If anything from your report is inaccurate, it could prevent you from successfully verifying your identity.

Opening up a new bank account online is another example of when you may need to verify your identity through the information listed on your credit report. The application process may require you to choose from a list of employers or verify that you once held a loan with a particular bank. This data matching method is a primary way of identity verification and one reason why keeping your credit report accurate is important.

How to read reports from the three credit bureaus

Equifax, TransUnion, and Experian all function to tell you and credit card issuers about your past credit activity, but the way they communicate this information differs. Reports often use codes, but the codes each agency uses aren’t the same.

To see what the codes mean, look a teach reporting bureau’s guide, listed here:

●     Equifax

●     TransUnion

●     Experian

These guides can help you see if codes stand for negative items, and if you should take further action.

How to get a copy of your credit report

While you can order credit reports as many times as you want for a fee, you are entitled to one free copy of your credit report from each of the agencies, once per year. You may choose to order them all at once (and compare what they have listed) or space out your requests throughout the year to better monitor during the course of the year. Go to AnnualCreditReport.com to request your free reports, made available as part of the Fair CreditReporting Act.

FAQs about credit report

What does an “open account”mean on my credit report?

Any credit account or loan that hasn’t been actively closed by you or the lender is considered an open account, even if you’ve paid it in full or don’t use it anymore. Remember, closing an account can lower your total available credit and increase your overall credit utilization ratio, which can hurt your credit score. Know which accounts are still open, but close unused accounts with care, and never assume old accounts are automatically closed accounts.

What does a “U” stand for on a credit report?

‘U’ generally means unclassified, but each agency has its own key for understanding what a code means. 'U' typically indicates that an account is newer or wasn't updated when the credit report was run. 'U' can also indicate past due payments or that an account is with a collection agency. Be sure to follow up if you have concerns.

Who can see my credit report?

The government, employers, insurance companies, landlords, and financial institutions can access your credit report, but you’ll usually know about this in advance or give your explicit permission.

In fact, it is against the law to access someone else’s credit history without permission or within the course of doing business. Even when you link your online IRS payment account to your credit report, you have to give permission first—they won’t access it without you knowing.

Always read the terms of your credit accounts, employment applications, and insurance policy agreements to know what they can access and if your credit report is among the things they can look up.

Where can I find my credit score?

You may want to see if you have good credit in an easier way than reading through your report. This is where a credit score from one of the major credit bureaus is handy. The free credit reports that you access online each year do not come with a credit score, and the agencies may even try to sell you one as an add-on service at that time.

If you don’t want to pay for it, you can still access it. Many credit card companies will give their borrowers a glance each month as part of your monthly statement, or directly on their app like Petal does. Some budgeting apps include a FICO score, as well. The odds are good that you already have access to your score through an existing financial provider and won’t have to pay to see it.

Can someone run a credit report without me knowing?

Soft inquiries into your credit are used in the normal course of business with companies and organizations, and usually don’t require you to give explicit permission each time they are pulled. These inquiries also happen anytime you get a "pre-approved"credit card offer in the mail, but if you don’t want to be contacted about these offers, contacting the company that sent it and telling them you want to opt out can stop offers from coming. It’s also common when you already have an account with a bank, and they send you an offer for one of their lines of credit. These inquiries don’t hurt your score, and they usually don’t require your explicit permission.

Hard inquiries, on the other hand, happen when you take one of those “pre-approved” offers and submit the actual application. The application process does require your permission, and hard inquiries can temporarily affect your score.

In short: soft inquiries can happen without you knowing, but you most likely have to give permission for a hard inquiry to occur.

With the Petal 2 card, you can help to grow your credit score with responsible spending and on-time payments, because we report to all three major bureaus. Learn more about the Petal 2 card today!

This blog does not provide legal, financial, accounting or tax advice. The content on this blog is “as is”and carries no warranties.

ThePetal 2 Card is issued by WebBank, Member FDIC.

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