How to Read a Credit Report

What a Credit Report Actually Contains

A credit report is a file of credit-related activity maintained by a credit reporting company. Three nationwide companies, Equifax, Experian, and TransUnion, each keep their own file, and the information in them can differ because lenders do not all report to all three. The Fair Credit Reporting Act is the federal law that governs what may be included, how long it may stay, and how consumers can challenge it.

Reports are usually organized into four blocks: identifying information, account history, inquiries, and collections or public records. The order and the labels vary by company, but the underlying data points are largely the same. Reading the report means checking each data field against what you know to be true about your own accounts.

• Identifying information: name, addresses, date of birth, Social Security number, employers
• Account history: each tradeline reported by a lender or collector
• Inquiries: records of who requested the file and why
• Collections and public records: debt collection accounts and bankruptcy filings

Identifying Information and Why Errors Matter

This section lists variations of your name, prior and current addresses, date of birth, Social Security number, and employers that have been reported. Some companies display only a partial Social Security number. None of these fields is used to calculate a credit score, but they matter because credit reporting companies match incoming data to a file using personal identifiers.

If a name is misspelled or an address belongs to someone else, accounts that are not yours can be merged into your file. That is why the identifying section is worth reviewing line by line before moving on to the accounts themselves.

• Check for misspelled names and unfamiliar name variations
• Check for addresses you never lived at
• Check that the Social Security number is yours and correctly formatted

Reading Tradelines One Account at a Time

Each account entry, often called a tradeline, describes a single credit relationship. A tradeline typically shows the creditor name, a masked or full account number, the account type, who is responsible for the debt, the date the account was opened, the credit limit or original loan amount, the current balance, the scheduled monthly payment, the date of last activity, and a status code.

Account type distinguishes revolving accounts, such as credit cards and lines of credit, from installment accounts, such as auto loans, student loans, and mortgages. Responsibility codes show whether the account belongs to you individually, is joint, or reflects authorized user status. This distinction affects how the account is weighed in scoring models.

The balance relative to the credit limit on revolving accounts is a commonly referenced figure because credit-scoring models evaluate how much of an available limit is in use. Installment accounts are evaluated differently, since the original balance declines on a set schedule.

Status codes range from paid as agreed and current to 30, 60, 90, or 120 or more days past due, charge-off, collection account, closed by consumer, or closed by grantor. A status of paid as agreed with no late payments is generally the most favorable entry a lender reports.

• Creditor name and masked account number
• Account type and responsibility
• Date opened and credit limit or original amount
• Balance, scheduled payment, and payment status

Payment History and Reporting Time Limits

Payment history is the record of whether payments arrived on time, and it is often the most heavily weighted category in credit-scoring models. Late payments are reported in increments, usually 30, 60, 90, and 120 days past due, and each increment represents a more serious delinquency.

The Fair Credit Reporting Act generally limits most negative information to seven years, measured from the date of first delinquency on the original account. That clock begins with the missed payment that led to the delinquency and does not restart simply because a debt is sold to a collection agency or transferred to a new servicer.

Bankruptcy filings are handled separately. A Chapter 7 bankruptcy may generally be reported for ten years, while a Chapter 13 case may generally be reported for seven years from the date the case was filed. Positive information, such as accounts paid as agreed, is not subject to the same seven-year ceiling.

Closed accounts in good standing commonly remain in a file for about ten years from the date of closure. Accounts with negative history typically drop off at the end of the applicable reporting period.

Inquiries: Hard and Soft Requests

An inquiry records that someone requested your credit file. Inquiries are divided into two categories based on the reason for the request. A hard inquiry follows an application for credit, such as a credit card, auto loan, or mortgage, and it is visible to other lenders who review the file.

A soft inquiry results from a request that is not tied to a credit application. Examples include promotional prescreening offers, account reviews by an existing lender, insurance or employment checks where permitted, and your own request for your report. Soft inquiries are not visible to other lenders who pull the file for a credit application.

Hard inquiries typically remain on a report for about two years, though credit-scoring models commonly consider only those made in the recent twelve months. Scoring models generally treat a group of inquiries for auto or mortgage loans within a short shopping period as a single inquiry, which reflects the way consumers compare rates.

Collections, Public Records, and Consumer Statements

When a debt goes unpaid, the original creditor may charge it off and either sell it or assign it to a collection agency. Both the original account and the collection account can appear on a report. The seven-year reporting window for the collection account is generally tied to the date of first delinquency on the underlying account, not to the date the collection agency acquired it.

Public record information in a credit file is now largely limited to bankruptcy filings. Most civil judgments and tax liens were removed from consumer files by the nationwide credit reporting companies after those companies tightened their standards for identity matching and complete public record data.

A report may also contain consumer-supplied items. These can include a personal statement explaining a dispute, an active duty alert, a fraud alert, or a security freeze. A freeze restricts access to the file and must be lifted by the consumer before most lenders can review it.

Checking Accuracy and Exercising Dispute Rights

Consumers can request their reports from each nationwide credit reporting company. AnnualCreditReport.com is the centralized site established for that purpose under federal law, and the Consumer Financial Protection Bureau and the Federal Trade Commission publish guidance on how the process works and what consumers are entitled to receive.

Under the Fair Credit Reporting Act, a consumer may dispute information believed to be inaccurate or incomplete. A dispute can be sent to the credit reporting company, which must conduct a reinvestigation and generally respond within thirty days, or sent directly to the furnisher that supplied the data. The result is provided in writing, along with a copy of the file if the dispute resulted in a change.

If a dispute is not resolved to the consumer's satisfaction, options include filing a complaint with the Consumer Financial Protection Bureau or the state attorney general, and adding a brief statement of dispute to the file so that lenders who review it see the consumer's position.

Reviewing the report periodically helps catch identity mix-ups, duplicate collection entries, and accounts that were closed or paid off but not updated. Each of those items has a corresponding data field, and each field can be verified against your own records.

Report Versus Score: Two Different Documents

A credit report and a credit score are related but distinct. The report is the underlying record of accounts, balances, payment history, and inquiries. A credit score is a numerical summary produced by applying a scoring model to the information in a report at a particular moment.

Because scoring models use different formulas and different weighting, the same report can produce different scores depending on which model is used. Lenders may also use their own internal scoring or underwriting criteria rather than a single published model.

This is why two reports pulled on the same day from different nationwide companies can look slightly different and can be summarized by different scores. The report is the source document, and the score is one interpretation of it.