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How to Read a Credit Report

Credit reports are valuable sources of information on the purchasing and payment habits of people. This information is used by potential creditors and lenders, so that they can evaluate the creditworthiness of applicants.

It is important to know what data is included in your credit report, because a clean credit report is needed for major purchases such as obtaining housing or credit application for the coverage of other needs. It is recommended that you are aware of the components of your credit report before the lender or creditor receives this information. The reason for this is that you will have the opportunity to clear any errors or discrepancies that may exist in it. If such errors are not resolved, you may be hindered in your credit application.

Your first encounter with a credit report may be quite confusing. There are several categories of information that each credit report includes:

  • Personal Data

    This paragraph includes such data as name, full address, social security number, occupation and name of company in which you are employed. Some reports include information on your past employment and addresses.

  • Summary of Credit History

    This section gives information about the number and types of accounts you have that are past-due or in good standing.

  • Detailed Account History

    This section is one of the richest in information, because it lists all of your accounts and payment history. Even though this information can be far too detailed, you should examine it very cautiously so that any discrepancies that may appear are fixed.

    The information on every account will include the name of the company that provides the information. The number of the account will be also included, which for privacy concerns can come in different forms than the original one. The report will also clearly state the type of the account that you are holding as well as the repayment terms associated with it. The month and the year when the particular account has been opened will be also noted as well as the credit limit or the amount of the loan correspondingly.

    This section of the report also includes information on the highest amount that has been charged on the credit card, which is referred to as high credit. In the case of loans, the high credit represents the amount of the original loan. The payment history is another component found in this category, as well as the current account status. Finally, the account history includes the last date at which the creditor has made an update of your account.

    Depending on the company that provides the credit, this section may also include collections accounts.

  • Public Records

    This section typically includes information on:

    • bankruptcies
    • tax liens
    • judgments
    • state and country court records
    • overdue child support (depending on the state of residence)

    The serious financial problems that have been experienced can stay kept in your credit report from 7 to 10 years depending on the type of the account, so do your best to keep this section of the credit report as clean as possible since it can have a devastating effect on your credit score.

  • Credit Inquiries

    This section of the credit report only reflects the inquiries toward it that have been done by third parties. You should have in mind that the version received by lenders and creditors is shorter than the one you receive. The reason for this is that the former includes exclusively hard inquires which represent inquiries needed for approval of your credit application.

You should always closely examine your report so that you make sure that you are actually the holder of the loans and credits listed in it. Additionally, you should check whether the listed as open accounts are current loans or balances, because errors may occur. For example, a loan that you have paid off may be still listed as pending coverage or a credit card you have closed may be written as opened. In such a case you should contact the corresponding bureau to fix the error.

A form for writing in the discrepancies is attached to the credit report. Provide copies of the documents that prove that you are right and a mistake in your report has been made when filling the form. Your claim should be examined by the bureau; they are required to do so by law.

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