Although getting hold of a copy of your credit report is relatively easy to do, it is also where things can start to get confusing. What are Charge-Offs? What are Inquiries? In this article we provide the answers to these questions, as we look at how to read a credit report.
Just briefly we will look at the reasons why you may wish to request a copy of your credit report in the first place. The main reason is simply to check that the information is correct. Incorrect information can severely hinder your ability to be accepted for credit products. That leads to another reason why you may request a copy to see why you have just been refused for a line of credit.
So how do you get your credit report? There are numerous companies that will provide you with a paper or online copy for a small fee, but the three credit bureaus (Equifax, Experian and Trans Union) are legally obliged to provide you with a free copy once every 12 months. The easiest way of getting this free report is by calling Annual Credit Report on (877) 322-8228.
In terms of how to read a credit report, once you have received the report you will notice that it is split into several sections. These are usually: Identifying Information, Credit History, Public Records and Inquiries, though slight variations can occur depending on which credit bureau you went through.
The first section, identifying information, relates to your personal details such as your name, address, date of birth and previous addresses. It is imperative that you check whether this information is 100% correct, as even a seemingly minute error (such as an incorrect ZIP code on your address) can have a far reaching effect on credit applications.
The next section will detail your credit history. As well as the basic details such as the type of account (personal loan, credit card etc) this will detail how much you owe and the current status of the account. Examples of the account status include current, paid in full, past due and charged off.
So what is a charge off? If an account has been charged-off, it means that the credit company has suspended your account and written off the debt from their books. It will also likely have been passed into the hands of a debt collection agency, and the only way that you can erase this significant black mark from your credit report is to pay the outstanding debt and have it removed.
The public records section will list your financial discrepancies, such as court judgments and bankruptcies. Items such as these will severely hinder your credit applications, so in an ideal world this section will be blank. It will not, however, list any criminal convictions it is purely for financial information.
The inquiries section lists any inquires made by either yourself or by a credit company. Although the odd enquiry will do no harm, regular enquiries show that you have applied for credit products several times in the recent past, and will make credit companies less willing to help you as it appears that you are struggling financially.
The key point with your credit report is to dispute any incorrect information. You can do this by writing to the credit union and enclosing proof of your claims where appropriate. Incorrect or untrue information can be changed, and can give your credit score a timely boost. It is for this reason that knowing how to read a credit report is extremely important