debt

How to Read Your Credit Report

8 Minute Read

Even if you’re debt-free and don’t care what big banks and lenders think of your credit history, you can’t just ignore it. You still need to get your credit report and look for reporting errors or signs of fraud. That’s why you should check your credit report at least once a year.

But these little reports can be pretty confusing if you don’t know what to look for. What do those red flags that scream “something’s wrong!” look like, and what should you do once you spot one? It could be as simple as disputing a minor error, or dealing with something that needs immediate attention—like identity theft.

We know a credit report can be a lot to take in. But don’t worry! We’ve done the heavy lifting of figuring it all out so you don’t have to. Let’s walk through everything you need to know about reading a credit report.

What Is a Credit Report?

A credit report is kind of like a report card for your credit history. It can be used by potential lenders to determine your “risk,” which is basically just how likely you are to pay your monthly payments on your credit or loan accounts. A report can tell them:

  • The date you opened any credit accounts or took out any loans
  • The current balance on each account
  • Your payment history
  • The credit limits and total loan amounts
  • Any bankruptcies or tax liens
  • Your identifying information (name, address, Social Security number)

A credit bureau or credit reporting company like Equifax, Experian or TransUnion will provide your information to whatever company may be considering giving you a loan or credit account. These bureaus all operate independently, so their reports on you may contain slightly different information depending on the credit reporting company they used.

How to Get a Credit Report

You’re allowed one free copy of your credit report every year from each of the major credit-reporting agencies we just talked about above. But the reports aren’t automatically mailed to you—you have to ask! And since each agency keeps slightly different information on file, it’s worth checking with all three.

This ID Theft Protection covers ALL kinds of fraud.

Get Coverage

Check out annualcreditreport.com or call 877.322.8228 to order your free annual credit report.

Now that you know how to get your credit report, we’ll walk you through the four major areas you need to check for red flags. These could help you identify potential identity theft situations!

What to Look for in Your Credit Report

Identifying Information

This section has any personal information that could be used to identify you, including:

  • Name
  • Address
  • Social Security number
  • Date of birth
  • Phone number

Red Flags: Everything in this section needs to refer to you and not someone else who happens to share your name. Double-check the Social Security number just in case. And make sure you verify that all of the addresses listed are places you’ve lived. We’ll share later what steps to follow if you find inaccuracies on any part of your report.

Credit History

The bulk of the report is in this section. Your credit history includes:

  • Open and paid credit accounts like credit cards, mortgages and loans
  • Accounts shared with someone else
  • Total loan amounts
  • Remaining loan balances
  • Late payments
  • Accounts that have been sent to collections

Red Flags: Read and re-read this section to make sure everything listed is right. Check for payments being noted as late when they actually weren’t late. If you’ve closed a credit card account, confirm it’s showing up as closed on your credit report. Also, make absolutely sure no lines of credit have been opened in your name without your consent—this is crucial in monitoring for identity theft.

Public Records

You want this part to be blank. The financial activity listed here—like bankruptcy, tax liens, and judgments—is obtained from public records, and some things can stay on your credit report for 7–10 years.

Red Flags: It’s rare to find an error in this part of the report, but it’s worth checking. Mistakes in this section should be cleared up ASAP because they can damage your credit.

Inquiries

Here you’ll see detailed listings of every business that has requested your credit report. There are two types of credit inquiries: soft and hard. Soft inquiries are from companies wanting to send you promotional materials or current creditors checking your account. Hard inquiries are made when you apply for a credit card, loan or mortgage.

Red Flags: Hard inquiries cause your credit score to drop a few points, so be sure you’ve authorized all the hard inquiries listed. They should disappear from your report after two years.

What does an “open account” mean on my credit report?

An open account is any line of credit you’ve opened and not formally closed. Even if you haven’t used a particular credit card for a few years, it will show up as an open account on your credit report until you contact the company to close the account.

What does a “U” stand for on a credit report?

A “U” simply means “unclassified,” or that the account hadn’t been updated at the time the report was pulled. It’s one of many status codes that can appear next to an account on your credit report. Codes like this usually indicate a problem with the account like it being past due or sent to collections.

You might also see a “U” if the account is new and you haven’t made any payments on it yet. It doesn’t have a negative impact on your credit score and isn’t anything to worry about.

Who can see my credit report?

Most people can’t legally use your personal information to access your credit report. However, there are several types of organizations who are allowed to pull your credit: banks, creditors, lenders, insurance companies, potential landlords, collections agencies, potential employers, and the government.

The laws about who can access your credit score vary from state to state. If you’re concerned, do some research and find out what the law is where you live.

Where can I find my credit score?

If you’ve received a free credit report, it will not include your credit score. You’ll have to use a free credit score web service or pay for the service via MyFico.com or a credit bureau. Your credit card company may provide a free score to you, so it’s worth checking with them.

The score is calculated based on the following information:

  • How much debt you have.
  • How long you’ve been in debt.
  • Debt you’ve obtained recently.
  • The types of debt you have.(1)

When it comes down to it, it’s really just an “I love debt” score.

Your score will be a number between 300 and 850 (or just 0 if you have no credit). A “good” credit score is anywhere from 670–850.(2) Anything below that is either fair or poor.

It is possible to have a credit score of 0, which is what Dave recommends. But this doesn’t mean you should trash your credit to lower it as fast as possible! You can get your credit score down to 0 by paying off all your debt and closing all open accounts. If you don’t add any new debt—and you shouldn’t if you’re following the Baby Steps—you should have a score of 0 within a few months to two years.

Remember: no credit is not the same as having a low credit score. As long as you have one, you want it to be high.

Can someone run a credit report without me knowing?

It depends. You know from before that there are soft inquiries and hard inquiries. Soft inquiries happen all the time without your knowledge—a company might check your credit score if they’re planning on mailing you a promotional offer. These inquiries don’t affect your credit score in any way.

But hard inquiries require your consent. These impact your credit score and can’t legally be done without your knowledge. If you notice a hard inquiry you didn’t authorize, you’ll need to dispute it with the credit agency.

How to Dispute Inaccuracies

Any inaccuracies or mistakes on your credit report must be taken up with the agency that shows the error. Write a letter that lists each incorrect item you found and why you’re disputing it.

For example, you might list a credit card you’ve closed that still shows up as an open account on your credit report. Gather documentation and any evidence you might have that prove it’s a mistake. Then, send all of this by certified mail—and don’t forget a return receipt! The agency has only 30 days to respond, so you should see some movement fairly quickly.

While your credit report might seem complicated at first, you can check your report and easily find mistakes now that you know what to look for. It’s never a bad idea to be proactive!

Staying vigilant about your credit report is a great way to protect yourself from identity theft and keep track of your credit, so make sure you’re protected today!

Reading your credit report each year is just one of many ways you can protect yourself and your family when Murphy hits. Take our 5-minute Coverage Checkup to make sure you have the right coverage. 

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