Knowing how to read your credit score can help you learn how you can improve your credit. It’s also pertinent to monitor your credit reports frequently to stay updated on possible identity theft and fraud. Your credit reports from the three major consumer credit bureaus can help understand why you may have been rejected for credit, how bad information may affect your credit, and if someone tried to fraudulently apply for credit under your name.
Separate credit reports are issued by TransUnion, Equifax and Experian which may contain information about your credit activity payment history as well as the status of your credit accounts depending on reporting from creditors and other sources.
How TO Read My Credit Score & Why is Credit Report Necessary?
A credit report is very necessary, because credit card lenders and issuers pull and review them to help determine whether or not you are a credit risk, what interest rate they’ll offer you, as well as the amount of credit limit. Credit reports can also be viewed when you are renting an apartment or purchasing insurance.
Now let’s get down to the basics of where you need to start when reading your credit report.
Credit reports are typically divided into six sections and they are;
Personal Information
- Name
- Social security number
- Birthdate
- Address
- Phone number.
If you notice any incorrect identity information on one of your credit reports, you can file a dispute or an update with the reporting credit bureau to have it changed. You can also notify the creditor that reported the details and request that an update be sent to the credit bureau.
Employer History
This may be contained in the personal information section, and you file a dispute to change outdated details or add missing employer information. The employer detail is included on the reports to help verify your identity.
Consumer Statements
This section may include any brief statements you’ve submitted to a credit bureau.
Account Information
Here you’ll find specific details on your accounts including
- Open accounts
- Closed accounts
- The dates accounts where opened or closed
- Payment history
- Credit utilization
- Current account balance
- Loan payment status.
According to the Consumer Financial Protection Bureau recommends watching out for the following errors.
- Accounts that belong to another person with the same name.
- Accounts opened via identity theft.
- Incorrect payment history
- Wrong balance or credit limit details.
- Reinsertion of previously corrected data.
Public Records
These public records may include bankruptcies, foreclosures, tax liens and civil judgement against you all of which may negatively hurt your credit.
Inquiries
Hard Inquiries happen when a financial institution checks your credit after someone has applied for credit in your name. This implies that the unauthorized hard inquiry on your credit report can pose a problem, thus you should watch this section closely.
Ensure you always do a regular check on your credit reports to spot errors that may affect your ability to get a loan or spot potentially fraudulent activities.