Reading Your Credit Report Properly

Make money from your photos, videos and blogs. Get Started Now!

Posted in: Credit Card in moneyloans's Blog

R1s, inquiries, charge-offs. What do these terms mean, and what do they have to do with knowing how to read a credit report? Well, in this article we help you understand a very this important document.

If you've followed our articles so far, it means you've decided to get your free credit report, and are most likely looking at it right now.

But most people that receive their credit report simply stare blankly at the myriad of numbers, abbreviations, and somewhat alien terms. What does it all mean? What's a trade line, a charge-off, or an account review inquiry?

As we now know, there are three primary players when it comes to credit reporting bureaus in the United States. In no particular order, they are TransUnion, Equifax, and Experian. Once annually, you are entitled to a free copy of your credit report from all three agencies.

Let's make this very clear up front. There really is no point in looking at only one of the agency reports. You really need to obtain and look at all three. A common mistake that most people do, is they pull one credit report from one agency, and assume that the information is the same on all three. This typically is not the case.

Since the system is voluntary, creditors will subscribe to whichever agency suits them, if any.

Also, keep in mind that the credit report you receive is built for consumers, to be read by consumers. It is best to go to them to receive your report, versus any alternative sources. Essentially, the consumer directed report is far more consumer friendly.

So now let's get to the inner workings and anatomy of a credit report.

Your credit report is divided into four primary sections. They are: identifying information, credit history, public records, and inquiries.

Identifying information is simply your identity info. It is best to look at this section closely to make sure it is completely accurate. More often than one would imagine, the spelling of your name might be incorrect, or there might be more than one social security number. Human error typically leads to these situations. Current or previous addresses, telephone numbers, employer information and date of birth might also be included in this section.

Credit history is the next section. Individual accounts are often called 'trade lines'.

Name of the creditor and account numbers will be show for each credit account on your file. The account number might be scrambled, for security reasons, so please keep that in mind. The account entry will also include:

    * The date of origination of the account (when it was opened)
    * The type of credit (this can include installment types which would be mortgages or car loans, or a revolving type such as a credit card.)
    * Whether the account is solely in your name or joint with another individual.
    * Total loan amount, highest balance on the card, or high credit limit.
    * The amount outstanding on the account.
    * Any fixed monthly payments or monthly minimum.
    * Whether the account status is open, inactive, closed, etc.)
    * Your history of payment and how well you have paid.

The Experian report explains your payment history in plain English. It will say whether you "never pay late" or "pay 30 days late" etc. This section may include charge off accounts or internal collections.

If an account is charged off, this simply means that the creditor has given up on collection. Obviously, this is NOT good, and should be resolved if possible.

On other reports, payment codes ranging from 1 to 9 may be displayed here. An R1 or I1, for example, would be an indication of a good payment history towards installment or revolving accounts.

Public Records. Under public records, you want it to remain completely blank. Basically, if you have a public record here, you've had a problem on your credit file.

Don't confuse this section with criminal public records. You won't find any of that information here. Judgments, tax liens, bankruptcies. If you have any of those here, your credit will take a beating.

And finally, we come to the inquiries section. Basically, this is a list of everyone who has requested to see your credit report. This includes you asking a credit bureau for a copy or your own report, or any potential lender looking into your credit information.

You will see both hard inquires and soft inquiries in this section. Hard inquires are initiated when you fill out an application for credit. Soft inquiries are when a company wants to send out any promotional information to pre-qualified individuals. Soft inquiries also include current creditors monitoring your account.

It is widely believed that a high number inquiries will have a negative impact on your credit, but in reality, they will most likely not affect you. FICO scoring models ignore the majority of these inquiries.

For example, if you were to get a car loan or mortgage, the model will most likely ignore inquiries within 30 days of receiving these credit products. Also, if two or more hard inquiries are submitted in the same 14 day period, they will be counted as just one inquiry.

As we've mentioned before, upon finding a mistake on your credit report - this could be a disputed amount or an account that isn't yours - you need to complete the form which comes with your report, or follow dispute instructions on an attached explanatory sheet.

The dispute process can take a while since creditors have up to 30 days to respond to the discrepancy claim. Until the dispute is resolved, it will continue to show on your report. Again, it is best to thoroughly go through your report in detail. Many industry experts feel that up to 80% of credit reports have some degree of inaccuracy! Now that you know how to read your credit report, get yours today and get reading.

Are you confused when it comes to credit reports? Do you not know what your credit score is? Or worse, do you have a history of bad credit and don't know where to start rebuilding it?

Chad Pearson has over 10 years of industry experience, and owns and operates What Is a Good Credit Score Inc., which has been helping people from all walks of life gain access to their credit history, as well as helping them improve their credit score.

If you're interested in knowing your credit score free, and instantly, visit his website at http://www.whatisgoodcreditscore.net/find-out-your-credit-score-instantly.

Article Source: http://EzineArticles.com/?expert=Chad_Pearson