How to understand your credit report
The first thing you need to understand is that you will need to get all three of your credit reports in order to get an accurate view of what is on your reports. You cannot just get one as they may and often do vary from credit bureau to credit bureau.
The first section is your identifying information - your name, where you live and work and so forth. Even this section can be wrong. Make sure only your social security number appears in this section. If there is another social security number there, then incorrect information becomes more likely to be attached to your report.
Check this section for:
- Misspelled name
- Incorrect social security number
- Incorrect marital status, particularly if divorced but still shows spouse as current
- Wrong birthday
- Incorrect address or phone number
- Incorrect employer information
Next comes your credit history. This should include all your credit accounts for the past several years and the status of each, including account number (may be scrambled), balance owed, late payments and so forth. Look over this section carefully for errors.
You especially want to note any items incorrectly noted as "charged off". This means the creditor feels they were unable to collect from you and have given up. Obviously, that is a huge negative on your report. You may also see "default" or "internal collection". There may also be payment codes from 1-9, with 1 being a good number.
Check this section for:
- Duplicate accounts
- Delinquent accounts older than 7 years
- Incorrect account information, particularly accounts listed as unpaid which are current
- Closed accounts listed as open
- Accounts you closed not listed as closed by consumer
- Credit accounts belonging to someone else
Next comes the public section, which is where any bankruptcies or tax liens or other public financial issues relating to your account. Obviously, you want this part to be empty, as all of these are very negative.
Check this section for:
- Bankruptcies older than 10 years which should be removed
- Lawsuits, liens, etc. older than 7 years which should be removed
- Bankruptcies and lawsuits that you were not a part of
- Paid liens listed as unpaid
Finally comes inquiries, which is every request the credit bureau has had for your credit report. This can be very interesting reading.
Hard inquiries are ones you initiated, whether for a home loan or a credit card or other situation where your credit history may have been relevant. Soft inquiries are requests for your credit history for promotional purposes, such as the preapproved offers you may be tired of seeing in the mail.
You may be surprised at how many of your accounts are not in your credit report. No one is required to report anything to the credit bureaus, so many smaller companies only report to them if it is negative, such as a chargeoff.
Watch out for scams when ordering your credit report
It is possible that some companies are actually trying to get your personal information, and will not provide you with your actual credit report. This leaves you open to identity theft.
You can learn quite a bit about the legitimacy of a company by checking it's website information. Go to Network Solutions and do a "whois" search on their domain name. If a phone number and address are provided, use a service such as Swtich Board or type the phone number, including area code, into Google.
Look out for:
- Odd domain names, particularly ending in unfamiliar extensions, which are more likely to be from outside the country.
- Sloppy copy. A real company will be very careful to present a professional image.
- An email address that does not match the website address.
- Requests for your ATM card PIN number or other information not relevant to requesting a credit report.
- Site not secure. The address should begin with https:// and not http://
- Sites that do not make any attempt to confirm your identity. Legitimate sites will ask a followup question to confirm your identity.
- Failure to receive your credit report. If it doesn't come, you are likely to have been scammed. They may not even charge your credit card. Time to contact the credit bureaus, the FTC and the Secret Service. The FTC has a website for victims of identity theft you will want to review at this point. If the scam came through email, send it to the Los Angeles Electronic Crimes Task Force at LA.ECTF.reports@usss.dhs.gov and to the FTC at uce@ftc.gov
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