A credit report is a detailed outline of credit accounts that a consumer has. It can include credit card accounts, personal loans, vehicle loans, mortgages, liens, energy and phone accounts, information about lawsuits concerning debt as well as limited transaction history for these accounts. Knowing what is in your credit report can be very helpful in determining your ability to borrow money and it also acts as a focused snapshot of your current credit situation. Reading a credit report and interpreting what it means is relatively simple.
An absolutely free credit report can be obtained annually by consumers through annualcreditreport.com. This is a centralized website created by the three credit reporting agencies known as Experian, Equifax and TransUnion. It should be noted that if you are required to pay or otherwise enroll in a program that will cost you money in return for your credit report that this is not the same free service offered at annualcreditreport.com.
Depending on how many accounts that generally appear on a credit report you have had in your lifetime, your report may be several pages or only a few pages long. The first page will generally contain your personal identification such as name, current address, and social security number. It is important to take note as to whether or not this information is correctly written on your report. If it is not you should contact a reporting agency immediately as this could be a sign of a larger overall problem with your consumer report.
After personal information, the report begins to list the accounts that you have open currently as well as accounts that have been closed. Accounts older than seven years do not appear on a credit report. Do not worry if you do not immediately recognize the names of the businesses with whom the report claims you have an account with. Many times a companys parent company or an extended legal business name is used instead of a name commonly used in the market. Another reason you may not recognize a companys name is if the account was sold to another creditor or account holder. This can happen if an account is severely delinquent, if a company is purchased by another company, or for another reason the account is sold. As long as you can recognize the amount owed or in some other way trace why that name is appearing on the report, the account should be legitimate.
Each name listed is followed by recent account activity which should show any late payments, charge-offs, delinquencies and payment amounts as well as any revolving balances. Accounts that are closed may still show the most recent account activity but will be marked as closed. Account that have been settled may show remarks such as paid for less than owed however notes may not always accompany other account information.
After all account information is listed there will generally be a FICO score listed at the end of the report. FICO refers to Fair Issac Company which is the entity responsible for the mathematical equation used to determine a consumers credit rating. This number can range from 550 to over 800 with the higher end of the scale meaning better credit worthiness. This is the number lenders use along with the information in your report to determine if you are a good credit risk or a bad one. Many things can affect your credit score such as consistency in payments, amount of accounts that are open, negative marks such as bankruptcies, lawsuits, or severely delinquent accounts. No score or lower than 620 is considered poor credit. A score of 620 to 700 is average and above 700 to 800 is good and above 800 is excellent. This is a general application of scores and lender requirements for scores to obtain the best market rates fluctuate all the time. For example the minimum credit rating to qualify for the best rate offered for mortgages recently changed from 690 to 740. The score is just a quick reference and lenders also look carefully at other aspects of a report as well as things like income and job history that have nothing to do with the report.
In general these are the most important aspects of a credit report and how to interpret them. Knowing what is contained in your report is essential to make sure you are accurately portrayed to potential lenders. There may be information on your report that is inaccurate and should be changed as soon as possible. Going to annual credit report.com will get you a free copy of your report that you can use to plan for the future.
Get informed on getting a how to read a credit report at the writer’s website.