How to read your credit report: a guide • Benzinga

A credit report contains a wealth of information about your current outstanding debts, as well as your employment, bill payments, and loan history. The report also displays your personal information, including places of residence. Credit reports also show whether you have filed for bankruptcy and may indicate whether you have been arrested or sued.

Your credit report and score contribute information lenders use to decide if you can get loans and debt-related products such as credit cards. Landlords also use them to screen tenants, and some employers consult them when making hiring decisions.

You’ll be in better financial shape once you know how to interpret and correct the information that appears on your credit report. Once you know how lenders use credit scores, you’ll be one step ahead.

Why it’s important to understand what’s behind the number

Good credit is an important aspect of your financial well-being. A periodic review of your credit report allows you to review your credit score and find any errors.

Reviewing your credit report regularly could alert you to potential identity theft. Every 12 months you can order a free credit report which contains your free credit score with the three main credit agencies: Experian, Trans Unionand Equifax.

Lenders generally look at your Score from Fair Isaac Corporation (FICO). Founded in 1956, FICO was the first company to offer a credit risk model with a numerical score. This model continues to be used by major credit companies to determine your creditworthiness.

The FICO score ranges from 300 to 850although lenders use several different scores for different financial products. Lenders often use different credit score formulasas well as information from various credit reporting sources.

For example, your home loan score may differ from your credit card score, while shopping online may produce a different score than the previous two. Since lenders look at different reports, you may qualify for lower interest rates depending on the scores the lender considers, so it would be wise to shop around when looking for a loan.

Also, you only want apply for the credit you need, since your recent credit activity tells a lender what your credit needs might be. If you apply for a lot of credit in a short period of time, a lender could interpret this as reflecting a worsening economic situation, which could also negatively affect your credit score.

An example of a credit report requested by an Experian tenant screening service can be seen below:

Credit report information

This particular report shows two revolving credit accounts and one credit card accounteach with low limits, and that the individual has only borrowed small amounts.

The result of the report is a credit score of 300 to 499, which indicates bad credit despite no delinquencies. Most lenders and landlords would avoid someone like this since they don’t have a lot of credit history.

What you need to understand about your credit report

Your credit file is made up of several elements:

Component 1: Your Personal Information

Personal items that appear on your credit report typically include your:

  • Legal name(s) and alias
  • Address(es)
  • phone numbers)
  • Date of Birth
  • Social Security Number: Credit agencies often hide this number in reports unrelated to employment or tax where you would have disclosed it.

Component 2: Your work history

Information about jobs you have held may be included in your credit report. If you find any inaccuracies, you can file a dispute to change the information on the report.

Employment data that appears on a credit file can often be used to verify your identity.

Component 3: Credit inquiries

This section highlights legitimate businesses, such as banks, credit agencies, or landlords, who have inquired about your credit status.

When you apply for credit by applying for a bank loan or a credit card, for example, the potential lender makes what is called a difficult investigation. Credit checks not performed by potential lenders are called soft inquiries.

Your current credit accounts or business lines usually make up the bulk of your credit report. In fgeneral, the more accounts you have in good standing, the higher your credit score will be. As long as your accounts remain in good standing and all payments have been made in a timely manner, your credit score should be higher.

Credit scores are depending on your behavior over time, So the longer you show good credit behavior with a lender, the better your score will improve. If you have multiple accounts, it’s important to make timely payments to each of them. Outstanding balances should also be kept low relative to your accounts’ credit limits.

Besides, closing and opening of different accounts can affect your overall credit score. For example, if you consolidate all your credit card accounts in one account, this could negatively impact your credit score, especially if you end up using a large percentage of your total credit card limit. Additionally, frequently opening and closing accounts, as well as transferring large balances, can hurt your credit score.

What to do with inaccuracies

Errors and inaccuracies in your credit report can affect your credit history and your current credit score. Your personal information (name, address or telephone number) may contain errors.

Accounts, loans or credit cards may not belong to you or may have been created through identity theft. Erroneous reports of overdue or late payments may also appear.

Closed accounts may also be incorrectly listed as open, or an outstanding debt may be listed more than once. Once you have found an inaccuracy, you can contact both the creditor who provided the information and the credit reporting company to have your credit report corrected.

If you decide to do so, explain to them what you think was wrong and your reasons. Be sure to include copies of all documentation that supports your side of the problem. Most credit reports have a section on how to dispute errors.

Final Thoughts

You may need a high credit score to facilitate future loans and get more credit. Raising your credit score involves paying your bills on time, every time, which can be done by setting up automatic payments with your bank.

If you have any missed payments, be sure to pay them as soon as possible and keep following up. Most negative items stay on your credit report for seven years, although bankruptcies stay on your report for 10 years.

Credit score models also tend to look at how close you are to your credit limit, and a red flag is raised if you exceed or get too close to your credit limit. A nearly depleted account can also hurt your credit rating, so make an effort to keep your debt balances low in proportion to your overall credit limit.

When it comes to your FICO number, lenders in the United States tend to turn away people with credit scores below 599. Those with low and bad credit (300-599) are unlikely to get approved. for a large loan.

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