How to read a credit report and make sense of all the items on it

What are credit reports?

A credit report is an extensive and detailed compilation of your personal and financial information. It includes your name, address, bank and credit card account details, history of payments, timeliness of those payments, bankruptcy information, tax lien information, and information about any court cases where you had to pay money. These reports are compiled by entities known as credit bureaus. The three biggest and most well-known credit bureaus in the US are Experian, Equifax, and TransUnion. Whenever you apply for a loan, credit card, or any other service, the companies or institutions where you apply will look at your credit report to judge whether you are a worthy customer for their services or not. Hence, it goes without saying that credit reports are really important.

Credit scores and credit reports

Credit reports are different from credit scores. Most of the people may have heard about credit scores as there is plenty of marketing done around that term. The credit score is actually a function of your credit report. Credit scores are 3 digit numbers which summarize the quality of your credit report. The bureau or credit company that assigns a credit score number looks at all the information on the credit report and then comes up with a number.

Importance of reading credit reports

Since credit reports are so important, it is crucial that you read your credit reports from time to time. You should read them not only to be informed about your credit quality but also to keep an eye out for any errors on your credit report. Such errors can affect your credit score and creditworthiness in a very negative way. For no fault of your own, you could be penalized and end up getting rejected for a loan, or you could even end up paying a much higher interest rate than what you should be paying. You are entitled to one free copy of your credit report every year from the three big credit bureaus, Experian, Equifax, and TransUnion. Once you receive this copy, you should go through and read everything on the credit report and mark anything that does not look right. Every credit bureau has a well-established dispute mechanism and many people successfully dispute errors on their credit reports every year.

Contents of credit reports and reading them

So the big question is: how to correctly read the credit reports? Let us look at the various items on the credit report and what you need to look at in each of those items. Remember that not every credit report will look the same. Different bureaus tend to compile these credit reports in a slightly different format. But the basic information remains the same.

Personal Information

This section will have your full name, birth date, phone number, address, and contact number. Emails can also be found in this section. Additionally, you may also see a partially revealed social security number, and names of your current and past employer.

Please note that you could see different variations of your name on different reports. Some could have your full name including your middle name, some may have only first and last name, there could be a short version of your first name or an alias, or you could see your maiden name or your name post marriage (if you are a female, this is especially true). You might even see initial for the middle name. Whatever the variation of the name, make sure it is the correct one.

Next, have a look at your address. Make sure it is the current version. If you have moved in the past and if the credit report still shows your old address, then get it updated. If you notice an odd-looking address than you have never had, then there is a good chance that you have suffered identity theft. Fraudulent persons use identities of innocent unsuspecting people and open bank accounts in their name. They use any address while conducting such fraudulent activities and that could be the reason for you looking at an incorrect address on your credit report. By using an incorrect address, the thieves could be getting bills at that address and hoping that you will not be alerted. Be vigilant with the address part of the personal information.


Accounts in your name that are operational and have not gone into any sort of default will be visible in the accounts section of your credit report. This section also happens to be the bulk of the overall body of the report. Each account will have a short summary at the top and then the details will follow. The accounts are not just restricted to checking and savings account. These can be credit card accounts, mortgage accounts, students/education loan accounts, etc.

The details of the account include credit limits, date of opening of the account, the names in which the accounts are operating, any joint holder names if the account is a joint account, the account number, and the institution where the account is running. Make sure you check very carefully these account details. If anything looks suspicious or if you spot an account which you do not recollect opening, mark it. If the date of opening looks suspicious, then it could be a fraudulent account opened without your knowledge. Any doubts should be flagged in this section.

The account section will also have balance and payment information.

However, this information may not be up to date because it would have been taken at the time the bureau was compiling the report. So, do not expect the account balance information to be completely accurate. But definitely keep an eye on your payments made historically. If there is an error on the report which shows your payments as late, then that will affect your credit score negatively. You will have to dispute such errors.

Another thing to watch out for is the credit limit. Usually, if you are too close to your credit card limit every month and if you use your credit card to an extent where your utilization is close to the limit, then that would be a negative for your credit score. You should try and stay as far from the limit as you can. Hence, checking the credit limit helps. If there is an error in the credit limit, then it could affect your utilization ratio and your credit score.

Lastly, check any accounts that were closed by you or by the creditor. If you close an account for no adverse reason and the account was in good standing, it will probably show up in all your credit reports in the future. There is nothing wrong with that. Just make sure you verify the date of closure and by whom the closure was requested. If an account was closed by the creditor because a payment was delayed or not made from your end, that is a negative item. But such creditor-led account closure usually stays on your credit report for 7 years.

Negative items

Watch out for any other negative items on your report such as a tax lien, a court case asking you to pay money, or a bankruptcy. Verify if the negative items are correct. If they are not, then dispute them because such negative items can significantly impact your credit score. There is nothing wrong with seeing negative items on your credit report as long as they are true and genuine.

Credit checks

When you apply for a loan or a credit card, request a limit increase, or make utility applications, then the institution where you have applied conducts a credit check. Normally there are hard credit checks which affect your credit score. They tend to lower your score marginally. Sometimes, institutions conduct what is known as a soft credit check instead of a hard one. Soft credit checks are not as extensive as hard checks and they require only basic information from the applicant. They do not cause any dip in the credit score either and are a quick way of gauging your creditworthiness. Details of these hard and soft checks show up on credit reports. Make sure you examine them, see the type of check, the date of the check, the institution conducting the check, and any other details mentioned in the report. Hard checks should not show up on the report after 2 years.

By following the above guidelines, you can conduct an extensive examination of your credit report and mark anything that looks suspicious and lowers your credit score. Good luck!

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