Checking your credit report is a vital part of maintaining healthy credit. You’ll be able to detect any inaccuracies that may lower your score. Anyone can learn how to read a credit report – and everyone should.
Your credit report holds all the details about how you handle your money – including, payment history, account opening dates, lines of credit, loans, defaults, and civil judgments. Sounds complicated? Don’t worry. Anyone can learn how to read a credit report.
And everyone should: Credit scores are an integral part of our financial well-being, therefore, it’s beneficial to keep track of yours and understand how your behavior affects your score. Checking the report lets you keep an eye out for signs of identity theft, and also for mistakes in reporting that can negatively affect your credit score.
Reviewing your credit report is free. Through each of the three main credit bureaus – Equifax, Experian, and TransUnion – you can request a complimentary report, once a year. Now through April 20, 2022, the credit bureaus are allowing weekly access due to the pandemic.
What is a credit reporting bureau?
A credit reporting bureau collects and stores personal information about how we manage money. This information is available to anyone who makes a request: lenders, credit card issuers, businesses, insurance companies, utilities, and even potential landlords and employers.
How do I get a copy of my credit report?
As noted above, you can receive a free copy of your credit report each year from the three main credit bureaus. (Or every week until April 20, 2022.) To do this, visit AnnualCreditReport.com and provide the requested information.
It’s a smart idea to enroll in a credit monitoring service to receive automatic updates so you can stay informed. Fortuna Credit is an excellent option with free credit monitoring and even more financial planning tools at no additional cost.
Why should I check my credit report?
Checking your report can help you determine any incorrect or incomplete information and identify signs of identity theft. It’s important to understand and be aware of your credit situation and what factors cause changes.
Note: If you are denied credit, you have the right to ask for a free copy of the credit report that the creditor used to make this decision.
What’s in my credit report?
Here’s something that isn’t in the report: Your credit score, the three-digit number that has a tremendous impact on the interest rates you’ll be able to get. Only you can authorize access to your credit report.
Want to see the score? In many cases, you’ll have to pay for the privilege. However, there are many ways to get free access to view your credit score. For example, Fortuna Credit is a platform designed to make it easy to search for loans and compare all options from the top lenders instantly in one place. But even if you don’t need a loan, you can still take advantage of the free financial planning tools. Find the “My Credit” tab of the website for a detailed credit summary available to everyone at no cost.
Here’s the other information you might see in a credit report:
The basics of your identity:
- Your name (including other versions, such as “John Smith” and “John H. Smith”)
- Your date of birth
- Your Social Security number (if you have one; some immigrants do not)
- Your current address (and other addresses you’ve lived at)
- Your current and former workplaces
- Your phone number
This information is mostly used to verify that it’s really you. Mistakes happen; for example, you might be the John Smith who worked at Save The Fuzzy Baby Animals Inc., not the John Smith who worked at The Umbrella Corporation.
If you find an error, you can file a dispute to have it removed. Also, if your employer information is not included in your report, you can make a request through the bureau to add it.
This varies from person to person, but types of credit may include:
- Student loans
- Credit cards
- Auto loans
- Lines of credit
The credit report notes your credit limits, loan amounts, dates when accounts were opened and/or closed, current balances of open accounts, whether you’ve ever made a late payment or had an account go into collection, and the amount of your available credit is being used.
That’s a lot of information. But it’s all used by potential creditors deciding whether you’re a good risk. Those who present greater risk pay higher interest rates.
Sometimes life doesn’t go the way we planned. Unemployment, illness, or other situations can result in over-extending your credit card and/or falling behind on payments. Credit-wise, this does not play out well.
All is not lost. You have an opportunity to share your side of the story by adding a “consumer statement” to the credit report. For example, you might say, “While being treated for cancer in 2020, I made three late payments on my student loans. Since then, I have made all payments on time and in full.”
You can also make a more general statement. Suppose you were struggling financially during the COVID lockdown. Your statement might read: “During five months of unemployment during the pandemic, I stopped paying on my credit card and auto loan. After getting a job I brought all my accounts up to date and have made regular payments ever since.”
You can choose to remove these statements later on.
You can’t hide from your past. Since the credit bureaus access public records, a credit report includes any past or current legal issues. These might include tax liens, foreclosures, bankruptcies, and civil judgments against you.
Two kinds of inquiries exist “hard” and “soft.” Soft inquiries are when someone checks your credit report for a reason other than wanting to extend credit. For example, a satellite TV company might want a peek at your past money habits to decide whether to request a security deposit on the equipment.
Hard inquiries, on the other hand, spring from your application for a new credit card or some other service. If you see a hard inquiry from a company whose name you don’t recognize, pay attention. It doesn’t always mean something is wrong; for example, the retail credit card you applied for might be handled by the parent company, which has a different name than the store.
But an unrecognized hard inquiry could also be a warning sign that someone is using your name to apply for credit. To find out what’s going on, contact both the company that made the hard inquiry and the credit bureau, where you should start a dispute.
What are some red flags to watch out for?
Again, mistakes happen. Sometimes all it takes is a couple of numbers to be reversed and suddenly another person’s information is being reported as yours. You can simply dispute this and make sure the bureau removes it.
Such a mistake could hurt you. If someone’s delinquent account is accidentally reported as yours, your credit score will drop. According to the Consumer Financial Protection Bureau, you should also be on the lookout for:
- Incorrect payment history, balances or credit limits
- The same debt being listed more than once (possibly under a different name)
- Incorrect information that had been taken out, but is now back in
- Accounts that belong to someone with the same name as yours
- Being listed as an account owner when you’re only an authorized user
- A closed account that is mistakenly reported as being open
What should I do if I find an error?
Fix it! Contact the credit bureau immediately to dispute the mistake. You should also get in touch with the company that reported the information and ask them to contact the credit bureau to fix it. The Fair Credit Reporting Act requires that they investigate your request without charge, and correct any mistakes.
Some people choose to report errors by mail, but it can also be done at the website or by phone. The first two options are best because you will have written or electronic proof of the steps you took to correct this.
The bottom line
Now that you know how to read a credit report, make it a point to check it at least every four months. This will keep small mistakes from hurting your credit, and might even mean stopping identity theft in its tracks.
Checking your credit report is an important step in keeping your credit healthy, and a healthy credit score is an essential part of your financial plan.
*Any opinions expressed are those of Fortuna Credit and have not been reviewed or approved by any of our partners.