Help Reading A Credit Report

When You Need Help Reading A Credit Report, You Need To Know What Is Good And What Is Not

What does a credit report look like?

When your credit report first reaches you, you might wonder if the printer went wild. The paper will be filled with numbers, abbreviations, and technical terms. What's a 'trade line,' 'a charge-off,' an 'annual review inquiry'?

How am I supposed to decipher this thing?

Usually, the credit report is divided into four sections. There's one heading for identifying information, one for credit history, one for public records, and one for inquiries. Information under the first heading, identifying information, is quite straightforward. When you read it, you might notice that your name is spelled more than one way, and that there may be more than one Social Security number. That's okay: the system is set up to keep any variations. Information under the second heading, credit history, is pretty straightforward as well, even though sometimes this section is called a 'trade line.' Each creditor will list your account number, when you opened the account, the kind of credit you were offered, the total amount of the loan, how much you owe, your minimum monthly payment, and the account's status, as well as other information. "Charged-off" means that the creditor has made efforts to collect, and written them off. The third section, public records, is best when it's blank. This is where the credit report lists the bankruptcies, judgments, and tax liens that will bring your credit rating crashing down. The fourth section, inquiries, is a list of everyone who's asked to see your credit report.

Is your credit score is a good one?

Your credit score is the result of a mathematical formula that combines data from all four sections of the credit report, in order to suggest the possibility of a borrower falling delinquent in the next 24 months. Consumer lenders and bankers use your credit score to estimate the likelihood that you'll pay your bills on time. As just an example, a FICO score generally ranges between 300 and 850. Any score that tops 750 is considered a good credit risk, while a score below 620 is considered risky. Of course, each lender decides for their own institution whether or not to lend to people with scores between thee two numbers.