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Reading Your Credit Report

Reviewing your credit report is a key step to ensuring financial health. Getting a copy of your credit report is just the first step - you then have to read and understand the information it contains. Above all, you are reading the report to make sure it includes only accurate information. Any serious inaccuracies (slightly outdated information is common) could reduce your credit rating or be a sign of identity theft.

Another important reason to review your credit report is to make sure that any potentially negative information has been removed in the timeframe mandated by law. Information about late payments, liens, suits, and judgments must be removed after seven years. Bankruptcies must be removed after 10 years. Tax liens that were unpaid can remain for up to15 years.

There are three major credit bureaus - Experian, TransUnion, and Equifax - and they each have a report on you. You should view all three reports since each bureau assembles information about you in different ways, and information on one report may not be present on another. You are entitled to all three credit reports up to once per year at no cost from or by calling (877) 322-8228.

Please note: Obtaining your credit reports through the Annual Credit Report website is free. You may be offered other products and services, such as your FICO score or a credit monitoring service when you click through to each credit bureau's website. These are optional services that you may choose to purchase, but they are not necessary to review your credit report for accuracy.

Sections of a Credit Report

There are several sections that are included in all credit reports.

Section 1: Identifying Information

This section includes your name, Social Security number, current and previous addresses, birth date, driver's license number, telephone number, and even your employer. If you are married, you may find your spouse's name as well.

Scan the information to make sure it is accurate, or at least mostly accurate. For example, the report may list a misspelling of your name or it may state that you live at an old address. Because methods of gathering personal information are not exact, some variation is normal. Look out for addresses that you were never associated with, driver's license or Social Security numbers that do not match, and mistaken employment information - they could be signs of identity theft.

Section 2: Credit History

In this section, you will find the names of your current and past creditors, associated accounts, and your payment history. Other information includes the age of the account, the type of account (credit card, merchant or store card, mortgage, auto loan, credit line, etc.), the total amount of the loan and how much is owed, the amount of fixed monthly payments, who owns the account (you alone, in conjunction with a cosigner or spouse, etc.), and status of the account (open, closed, inactive, paid in full, etc.). Each account also lists your payment history, including missed payments, collections, charge-offs, or defaults.

Review the credit history section carefully, paying close attention to any potentially inaccurate information. Almost everyone misses an occasional payment, but repeated missed payments (particularly those more than 60 days late), collections, charge-offs, and defaults are serious issues that will lower your credit score, making it more difficult and expensive to get credit in the future.

Each credit bureau writes payment history information in slightly different ways, ranging from easily understood phrases to numeric codes. When codes are used, lower numbers are better. Other reports use a color-coded system in which green is best.

Information in this section typically dates back seven years and is only erased after seven years have passed.

Section 3: Public Records

This section includes finance-related legal proceedings - bankruptcy, tax liens, foreclosures, repossessions, and judgments. Needless to say, anything in this section is a major problem for your credit score. There's not much you can do about any public records you may have - continuing to pay all your bills on time and reducing the amount of credit you are using are good strategies for raising your credit rating. On the other hand, inaccurate information in this section could be a sign of identity theft.

With the exception of bankruptcies and tax liens, information in this section typically dates back seven years and is erased after seven years have passed. If the information is accurate, there is no way to legally remove it.

Section 4: Credit Inquiries

Credit inquiries are simply occasions when your credit report has been accessed by a lender, potential employer or landlord. These inquiries may be "hard" or "soft." Hard inquiries are made by lenders when you fill out an application for credit. Soft inquiries are typically initiated by a lender who wants to potentially include you in a "pre-approved" marketing program, or these inquiries could be initiated by your current creditors to check for problems that may affect your credit worthiness.

Soft inquiries are nothing to worry about - they do not affect your credit score. Hard inquiries may affect your score, particularly if you initiate multiple new credit requests in a short amount of time.

Other Information

Depending on the credit report and your personal situation, there may be other sections on your reports such as "Dispute File Information" and "Reason Codes." In the event you once disputed a negative item on your credit report, that information will be reported in the Dispute File Information section. Reason codes are tips that are intended to help you understand negative information on the report and offer advice on improving your credit.

You may also find a section on "Collection Accounts" - accounts that have been turned over to a collection agency. If you find collection accounts that are not yours, you will need to report it to the credit bureau. If you find a collection account that is yours but that you do not know about, you will want to contact the collection agency or the creditor to resolve the matter.

If You Find an Error

As mentioned earlier, slightly outdated information is common on credit reports. In fact, most credit reports will have some kind of minor inaccuracy. What you are looking for are accounts that you did not open, inaccurate information about public records, and inaccurate payment information.

Each credit bureau has a process for addressing inaccurate information that you may initiate by using their website, mailing a printed form, or by calling them. If you suspect identity theft, you will want to place an immediate fraud alert in your file. If you find inaccurate information, act immediately to contact the credit bureau to correct the problem. While it is the responsibility of the credit reporting agency to correct any errors, correcting credit reports can take months, during which time you may be denied credit or charged higher interest rates.

To dispute accounts and marks on your credit report, please contact the correct credit bureau agency: Experian, Equifax, or TransUnion.

If you have questions about your credit report or would like to review it with a financial professional, contact a PFCU Financial Coach.