What Is a Credit Report? How to Read It and Check for Errors
What is a credit report? It is a document displaying your credit history. Sometimes, the report displays incorrect information. However, you can dispute the errors.
Are you thinking of applying for a new loan or a credit card? Before filing loan applications, you had better examine your credit report first. What is a credit report? This report is a vital part of the loan approval process. Lenders check this report before approving a loan.
Checking your credit report regularly or before applying for a loan is essential because it helps you track your credit information. Moreover, this report sometimes has incorrect information. Therefore, you must check this report for errors and dispute them if needed.
What is a Credit Report?
A credit report is a record containing your credit history made by credit bureaus. In the US, three major credit bureaus, Equifax, TransUnion, and Experian, collect information about your credit history from lenders to compile your credit report. What information can you find in this financial document?
A credit report displays the information in several sections. Credit bureaus may have slightly different sections in their reports. However, in general, credit report information covers the following sections.
1. Personal Information
This section displays your personal information, including name, date of birth, Social Security number, current and past addresses, and current and past employers. This information will not affect your credit score. However, you must fix personal information errors when you find them.
2. Credit Accounts
This section contains information about your current and past accounts. It affects your credit score and lenders’ decisions in approving your loan applications.
The credit account section lists your past and current credit accounts and their details, such as date opened, loan amount, lender’s name, current balance, and payment history. Your credit report may not list all your accounts.
This report typically no longer displays closed accounts after a certain period. Moreover, not all creditors report to the same bureaus.
3. Public Records
The credit report information also includes public records on bankruptcies, tax liens, and other legal financial actions. A credit report typically displays bankruptcies for 7 to 10 years, depending on the bankruptcy type.
Some reports also display unpaid child support in the public record section. This negative information stays for 7 years on the report. Information in the public record section affects your credit score.
4. Credit Inquiries
Your credit report also records who has looked at your credit. A credit report records two types of credit inquiries.
The first is hard inquiries. They occur when you apply for a credit card or loan. They stay on your report for two years and temporarily affect your credit score.
The second is soft inquiries. They happen when lenders check your background, or you check your own credit.
How to Read a Credit Report
You must check your credit record at least once a year or before applying for a big loan. Checking this financial document lets you detect fraud and errors early. You don’t need to contact your bank or lender to check it because it is available on a credit report website.
What is a credit report website? The website depends on the bureau from which you request the copy. Once you get the copy, you can start reading it.
1. Getting the Copies
To check your credit report, you need three reports from the three credit bureaus. This is because different bureaus work with different financial institutions in getting credit history information. Thus, their report may be a bit different.
You can request for all the three reports for from Annual Credit Report by phone or via its website. You can also visit Equifax, TransUnion, and Experian websites to request a free credit report.
When requesting a report, you may need to fill in important information, such as your name, phone number, and Social Security number. You may also need to answer security verification questions.
2. Verify Personal Data
After downloading your credit report, verify your personal data. You must make sure there are no errors in your name spelling, SSN, or address.
3. Audit Every Account
Next, you must audit every listed account in the report. Read the details of each account and ensure the lender’s name, credit limit, and balance are correct.
4. Examine the Payment History
You must also examine your payment history closely. It is possible to find late payments in months you paid on time.
5. Check Inquiries
The last stage is checking the inquiries. Examine them and make sure the lenders match your loan applications.
Checking a Credit Report: Errors to Look for
How to check your credit report? To help you check your report and spot errors easily, below are common errors on a credit report.
1. Identity Errors
- Misspelled name, wrong SSN, wrong phone number
- Incorrect accounts
- Accounts belonging to someone with a similar name
2. Incorrect Reporting of Account Status
- Closed account reported as open.
- Incorrect date opened and last payment.
- Accounts that are incorrectly reported as late
- Same debt listed a few times with different names.
3. Data Management Errors
- Accounts with a false credit limit
- Accounts with an inaccurate credit balance
How to Dispute Credit Report Errors
If you find errors in your credit report, you have the right to dispute the errors. You must contact the credit bureau and the company providing the information to the bureau to correct them. Below are steps to dispute credit report errors.
1. Contacting the Credit Bureau
To dispute those errors, send a dispute letter to the credit bureau that compiles the report. The letter must contain the errors you want to fix, your identity, contact information, reasons why you want the errors to be corrected, and a request for the errors to be corrected.
Moreover, you must also send a copy of your credit report. You can contact the credit bureau via its official website to dispute the errors. The bureau typically needs 30 days to examine and correct your error.
2. Contacting the Company that Provides the Information
You must also send a dispute letter to the company that provides the information to the credit bureau. This company can be your bank, credit card company, or landlord. The letter is more or less similar to the one you send to the credit bureau.
Credit Report vs Credit Score
A credit report is different from a credit score. A credit report is a credit history document. It contains pages of financial information regarding your credit accounts, payment history, and inquiries.
Meanwhile, a credit score is a number stating your credit performance. Your credit report doesn’t state your credit score. However, credit scoring models calculate the score based on your credit report.
What is a credit report? It is a document containing detailed information regarding someone’s credit history. Lenders use this report to check the background of loan applicants. Moreover, credit scoring models use this financial document to calculate credit scores.