Understanding Your Credit Report
Understanding Your Credit Report Is Half The Battle
A credit report tells you the grounds for your credit score. Without understanding your credit report, you will not know how creditors use this information as a determination of creditworthiness. Reports are usually split into several different parts:
- Summary
- Personal Information
- Credit Accounts
- Collections
- Statements
- Public Records
- Inquiries
Summary
Most Credit Reports begin with a Summary section that indicate the account types, average age of your accounts, and your credit utilization rate or usage. Although most credit bureaus report the same data, you may be surprised at how many firms track and report this information. TransUnion, Equifax, and Experian are not the only players in the game.
Decoding your credit report is key to understanding your score
Personal Information
This is where you find your name, date of birth, Social Security Number, phone number, addresses, and employers. While reviewing this section, it is important to ensure that all the information is accurate. Any discrepancies can be an indication that you’ve been a victim of identity theft.
Credit Accounts
Here, you will find the details of your various credit accounts and their payment history. If there are any errors regarding negative marks, it can impact your credit for years. Simply having to pay a late fee or interest is not a guarantee that your credit is negatively impacted. If your account is brought current before the 30-day mark, you will be considered in good standing.
This section may be divided between open and closed accounts. It can also be separated by installment loans, credit cards and mortgages. It’s possible to have your rent and utilities listed here in another section as well.
Closed accounts can stay in your credit report for up to ten years after they were closed in good standing. An open credit card account will stay on your credit report for as long as the account is open. However, if you’re behind on payments when an account is closed, it will take seven years after your last late payment to come off your credit report.
Collections
When you default on an agreed payment plan, the creditor will usually send your account to a collections agency. Accounts in collections have their own section on your credit report. Collections accounts have an incredibly negative impact on your overall credit score, and will remain there for seven years after the original delinquency date.
Statements
Consumer Statements are explanations that you can attach to your credit file to provide more information on an item you may disagree with or would like to provide details on. Consumer statements are voluntary and have no impact on your credit score.
Public Records
The majority of information contained in your credit report comes from companies voluntarily sending data to the credit bureaus. Those bureaus also gather information from public record databases like court systems. This is where bankruptcy records come from, and depending on the type of bankruptcy, it takes either seven or ten years to fall off your credit report. Bankruptcies are very bad for your credit score, although their impact goes down over time.
Inquiries
When someone looks at your credit report it shows up as either a hard or soft inquiry. It’s important to know their purpose and how these inquiries can impact you.
Soft inquiries do not impact your credit score. A hard inquiry, however, will drop your credit score several points. This impact is reduced over time. There are times in which several hard inquiries are made in a short amount of time during shopping for a car or mortgage in order to find you the best rate. At times like these, your credit score will only be affected as if one hard pull has occurred.
Soft and hard inquiries remain on your credit score for two years. Although the hard inquiries can impact your credit score during those two years, FICO credit scores only considers them during the first 12 months. Typically, your credit score recovers from a hard inquiry after just a few months.
But They Can Be Wrong!
When looking at your credit report, if you find a mistake, a dispute can be filed with the credit bureau, who then must investigate your claim. The bureau will then question the original creditor to validate the information. If it turns out there was indeed a mistake, the negative remark will be removed and your credit score will increase significantly.
Here at Credit Repair Express we specialize in carefully reviewing credit reports for those mistakes that will make the biggest difference in your credit score. We will help you to understand what should be in your report, dispute errors that don’t belong there, and help you build up a positive credit profile to significantly raise your credit score. Our clients typically see their scores rise within the first 45 days, and we don’t charge a penny until you see results!