Understanding Your Credit Report: What It Is And How To Read It
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If you plan on applying for a new credit account, maybe even an apartment, your credit report will play a big role in whether you get approved or not.
Checking your credit report can help you find errors that might be lowering your score. It can also help you spot signs of identity theft, like credit accounts you didn't open yourself.
This guide will explain what information is included in your credit report and what you should look out for when reviewing each section of your report.
Table of contents
- What is a credit report?
- How to read your credit report
- Disputing any errors you find
- Understanding your credit report FAQs
What is a credit report?
A credit report is a detailed summary of your credit history. It includes key details such as your payment history, account balances, credit checks and any public records like bankruptcies.
Credit reports are compiled by the three major credit bureaus: Equifax, Experian, and TransUnion. These agencies gather and organize data from your creditors and lenders, providing a comprehensive view of your credit activity.
These reports are essential in various financial matters, such as when you apply for loans and credit cards.
What information is included in your credit report?
Your credit report will usually include the following information:
- Personal information
- Full name
- Former names
- Phone numbers
- Date of birth
- Social security number
- Home address
- Employers
- Credit accounts
- Open and closed accounts
- Name of your creditors
- Payment history
- Account type
- Credit limits or loan amounts
- Outstanding balances
- Account opening and/or closing date
- Account status
- Public records
- Bankruptcies
- Home foreclosures
- Inquiries
- Hard inquiries
- Soft inquiries
Who uses the information on your credit report?
Banks, credit card companies and other lenders use your credit report to assess your creditworthiness — in other words, how well you manage debt. This helps them determine whether to approve your credit applications and what interest rates and other loan terms they’ll offer you.
Landlords and insurance providers may also review your credit report when deciding to rent you an apartment or set your insurance rates. Some employers might also check your report, especially if you’re applying for roles in finance.
How to read your credit report
While each of the main credit bureaus uses a slightly different format to organize their credit reports, they all include similar sections.
Here’s what you should look out for when reading your credit report:
Personal information
Your credit report will most likely start off with a personal information section. This section is simply meant for identification purposes and doesn’t directly impact your credit score.
Keep in mind you might come across different versions of this information, such as your full name with or without your middle initial. Other variations, such as married or maiden name, might also show up. These differences happen because lenders report all the personal information they have gleaned from your credit applications, whether old or new.
While slight differences on your personal information are normal, you should keep an eye out for phone numbers, employers, addresses or any other details you don't recognize. These might signal identity theft — especially if you also find credit accounts you don’t remember opening.
Credit accounts
This section lists all of your existing credit accounts, such as credit cards, personal loans and mortgages. You’ll also find closed accounts in good standing that were active within the last 10 years. Each account listed will include information such as payment history, account type, outstanding balances and credit limit.
Your payment history may be displayed in a grid format, showing each month and whether the payment was made on time or late. If a payment was late, the grid will show how many days it was overdue — 30, 60, 90, or more — and may be highlighted in red.
When reviewing this section, look out for errors like on-time payments mistakenly reported as late or incorrect balances. (Keep in mind that it can take up to 30 days after you pay your bill for the balance to be updated on your credit report.) You should also keep an eye out for accounts you don’t remember opening.
Negative accounts
Collection accounts are usually listed on a separate section of your credit report and will include information such as the date the account went into collections, the owed amount and name of the collection agency and original creditor. Bankruptcies are also listed separately under a public records section.
These negative accounts stay on your credit report for seven years, except for Chapter 7 bankruptcy which is reported for 10 years. If you spot an account that shouldn't be included in these sections, contact your creditor and the credit bureaus immediately, as these significantly lower your credit score.
Inquiries
Your credit report will also include a list of credit inquiries, which are instances when someone has checked your report. Credit inquiries might be separated by type: soft inquiries and hard inquiries.
Soft inquiries are not related to formal credit applications, so they don’t impact your credit score. Some examples of these are when you check your credit report through free credit monitoring services or when a creditor checks your credit history to send you pre-approved credit card offers.
Hard inquiries are credit checks carried out by a potential lender as part of an application for credit. This type of credit inquiry does impact your credit score, but only by a few points and for a short period of time.
When checking this section, make sure you recognize all of the inquiries listed. Also, note that inquiries older than two years should be removed from your report.
Disputing any errors you find
A study by the Federal Trade Commission (FTC) revealed that one in four consumers found errors on their credit reports that might lower their credit scores. If those mistakes aren’t fixed, they can lead to higher interest rates and trouble getting approved for loans or credit cards.
Under the federal Fair Credit Reporting Act (FCRA), you’re entitled to an accurate and fair credit report. So, if you spot anything that's wrong or outdated, you can dispute it with the credit bureaus.
Here are the steps you should take:
1. Get a copy of your credit report
You can request free copies of your credit reports through AnnualCreditReport.com. Through this website, you’ll have access to one free copy per week from TransUnion, Equifax and Experian.
You’ll need to verify your identity by providing some personal information, like your name and social security number. Additionally, you’ll answer a series of questions that only you should be able to answer, such as an old address or the name of one of your creditors.
For more detailed information, you can check out this guide on how to check your credit report.
2. Review your credit report carefully for errors
The information on your credit report should be accurate and up-to-date. Look out for payments incorrectly labeled as late, accounts you don’t recognize and hard inquiries you didn't authorize, for example. Negative items, like late payments or collection accounts, shouldn’t be reported on your credit accounts if they're older than seven years.
3. Dispute any errors you find
We have a detailed guide on how to remove negative items from your credit report. But in a nutshell, you can dispute your credit report online here:
You can also file a dispute through mail or calling the credit reporting agencies.
The bureaus have 30 days to look into your claim and will let you know what they find within that time. You’ll get their response either by mail or email, depending on how you submitted your dispute. Keep in mind that it may take more than one dispute to get errors removed from your credit report, especially if the bureaus require additional evidence to verify your claim.
Disputing your credit report is free, but it might take a while if you have a lot of errors listed. In this case, you can consider hiring a credit repair company. Just be cautious of those that claim they can erase all negative information from your credit history, even the one that’s accurate.