How to Read a Credit Report

A credit report is a record of how you have handled credit accounts, compiled by each of the three national credit reporting companies, which operate separately and do not exchange files with one another. Reports are typically divided into labeled sections: identifying information, account history (also called tradelines), credit inquiries, collections, and, when applicable, public records such as bankruptcies. Ordering a report through AnnualCreditReport.com, the site the three companies jointly operate to fulfill the free-report requirement under the Fair Credit Reporting Act, gives you the same data a lender sees when it pulls your file.

Each tradeline lists the creditor or furnisher name, the account number (often partially masked), the account type (revolving, installment, mortgage, or open), the date the account was opened, the credit limit or original loan amount, the current balance, the scheduled monthly payment, and a current status. The most information-dense part is usually the payment history grid, a row of month-by-month codes showing whether the account was paid as agreed, thirty days late, sixty days late, and so on. A separate field, the date of first delinquency, marks when an account first became past due and is used to calculate when most negative information drops off the report.

Inquiries appear in two forms. Soft inquiries, from your own requests, prescreened offers, or an employer or insurer, appear only on the copy you receive and are not visible to lenders. Hard inquiries, generated when a lender reviews your file in connection with an application, are visible to anyone who pulls the report and generally remain for about two years. Collection accounts, if present, list the original creditor, the collection agency, the balance, and the date placed for collection. Public record sections may show bankruptcies, which generally stay for about ten years, while most other negative items remain about seven years.

Because the three companies maintain separate files, the same account can appear on one report and not another, and a furnisher may report different balances to each. Reading a report therefore means checking the identifying information first, including name, address history, employers, and any misspellings or unfamiliar addresses, then reviewing every tradeline for accounts you do not recognize, balances that look wrong, duplicate entries, or payments marked late that were made on time. Under the Fair Credit Reporting Act, you may dispute incomplete or inaccurate information directly with both the credit reporting company and the furnisher, and the company must investigate, generally within thirty days.