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When it comes to understanding how to read a credit report, many consumers express confusion and lack of understanding. This is because it is not always easy to interpret what the report says. Without really understanding what the report says, it can seem like a foreign language. The good news is that it is really not all that hard to grasp once you know the basic set up of the credit report. Here are some tips to help you try to read and understand your personal credit report.
Why it is Important to Get Copies of All Three Credit Reports
The first common misconception when it comes to credit reports is that one report is just as good as another. This could not be further from the truth. Many consumers believe if they get a copy of one then the others must be pretty much identical. Reports can vary, however, because lenders may not report to all three credit reporting agencies. It is also important to get them directly from the three major credit reporting agencies (Equifax, TransUnion, and Experian). Getting one through a lender may not be as consumer friendly, thus making it harder to understand.
The Layout of a Credit Report
The good news is that all three major credit bureaus use a similar set up. The report is comprised of several sections, including personal information, accounts, public records, and credit inquiries. So, what can one expect to see under each of these sections? Here we will go into a little more detail.
1) Personal Information
This section is probably the easiest for anyone to understand. This is where consumers find their name, address, and other identifying information. While it may seem pointless to even analyze this section, it is very important to verify that the information in the report is accurate.
This is the section where consumers can find any accounts that have been reported to the credit bureau. These accounts will vary by type, including revolving accounts, auto loans, mortgages, and other miscellaneous debts. Here, consumers will be able to see their creditors, balances, payment history, and status of all accounts.
3) Public Records
Public records consist of any financial related data that has been filed against your name, including but not limited to bankruptcies, tax liens, and judgements. If there are public records against someone, it can really do a number on their credit.
4) Credit Inquiries
Every time a creditor asks to view a copy of a consumer’s credit report it will result in an inquiry. Inquiries allow consumers to see who has accessed their credit report. They also allow other creditors to see how many times a consumer has applied for credit. Too many inquiries can actually be damaging to one’s credit score.
While there may still be some things that don’t make sense on the credit report, it is much easier to understand if you know how it is set up. Getting a copy of all three reports each year is vital to protecting one’s credit history and staying on top of it.
Author: Jeff Gitlen
Jeff Gitlen writes about a wide range of finance topics including everything from student loans to credit cards to small business financing. Jeff's work has been featured on a number of sites including Bloomberg, CNBC, Forbes, Market Watch, and more.