How to Read a Consumer Credit Report

September 27, 2021 4:43 pm Published by David B. Coulter

If you’re applying for a loan, whether a mortgage, car loan or credit card, you’ll soon become familiar with your consumer credit report. Not only does this report form the basis for your credit score, but it also provides a transparent snapshot of your current and historical creditworthiness. It’s also a valuable tool for exposing any attempt to steal your identity before matters get worse. That said, you shouldn’t assume that you can necessarily ‘take your credit report to the bank.’ Errors are common, and some studies show that as many as 42 million Americans have them in their credit report. To avoid disappointment or frustration, learn what goes into a credit report and how to read yours.

Personal Information

In the header of your consumer credit report you’ll find your own personal details, including your name (current and previous where applicable), your address (current and previous), Social Security number, and date of birth. Bear in mind that something as simple as an alternative spelling of your family name, or a rogue initial in your middle name, can skew your credit score, so it’s important to check that details are accurate and up to date.

Credit Accounts

The real substance of your credit report is the section that details all your current and past credit accounts. For each entry, you’ll see the name of the lender, loan type, credit limit, payment history and current balance. When combined, this list gives lenders a fuller picture of whether you have a consistent record of borrowing within your limits and repaying on time. Those accounts that display regular repayments will improve your credit score, whereas any accounts that show missed payments or excessive credit utilization ratio (usually above 30%) will typically lower your credit score and raise potential red flags.

Accounts in Collection

If you don’t have a history of borrowing or always repay your loans within 30 days, this section might be blank. However, if you have had any delinquent accounts that have gone to a collections agency, these will be listed here. This information stays on your report for seven years. That does not imply negligence on your part. Medical bills that are not covered by insurance, for example, can be passed to collections without your being aware that any payment has been missed. Other scenarios, such as missed house repayments, are unlikely to emerge out of the blue but can easily occur when personal financial circumstances change.

Don’t panic if the name of the company linked to your collection is unfamiliar. Frequently, loans in default are purchased by debt collection agencies in search of penalties and higher interest rates. Nevertheless, there could possibly be errors in this section. Sometimes creditors are slow to update a delinquent account that has been paid. In that case, request a validation notice from your lender as proof.

Public Records

If delinquent accounts have advanced to the courts, there could be judgments against you for unpaid debt. These will be listed in the Public Records section and typically include foreclosures and bankruptcies (which stay on your report for seven to 10 years). When you have paid, it can take time for the credit report to be updated. If you’ve just turned 18, you shouldn’t have any public records on your report, and their presence could be a sign that someone has tried to steal your identity.

Hard and Soft Inquiries

Who’s been requesting your credit report? That is what you will see in the Inquiries section. There’s a crucial distinction to be made between ‘soft’ inquiries, which don’t affect your credit score, and ‘hard’ searches, which can lower it temporarily. You can check your report at any time without changing your score, but if a lender is making a hard search to establish your creditworthiness, that will show up on your report. It’s not just banks and mortgage lenders, either. Even your insurance, utilities and phone providers frequently run hard searches before approving a loan or contract. Hard inquiries stay on report for two years.

If the names listed among your inquiries are not familiar or the dates don’t tally, and you suspect that someone is trying to steal your identity, you can put a freeze on your report to stop it from being used to open any new accounts.

With so much information to decipher, it’s especially important to take a proactive approach and stay on top of your credit report. With ScoreMaster®, you’re in control. Find out how to get regular updates, spot any errors or identity theft attempts, and ultimately work towards achieving your best possible score.