Credit reports are those mysterious financial documents we’re told to keep a close watch over, but we rarely know what to look for once we have them in hand. We understand deciphering the information they contain can be valuable when it comes to favorable loan terms, homeownership, or something else entirely.
So how can we get to the bottom of what is on a credit report and dispute any errors uncovered — without going crazy in the process?
Let’s start with the basics
While each of the three credit-reporting agencies (Experian, TransUnion, and Equifax) issues reports with slightly different layouts, the reports all contain four categories of basic information:
- Identifying information, including your name, address, and Social Security number
- Your credit accounts, including the type, limit, balance, and date they were established
- A list of credit inquiries, or anyone who has tried to pull your report in the previous two years
- Information regarding overdue debt, foreclosures, bankruptcies, liens, or judgments in your name
It’s important to note that report information may vary among the three credit-reporting agencies. To get a clear and total picture of your credit, make sure to pull one report from each agency.
Important things to look for
Now that you know the types of information you’ll find on your report, make sure you keep an eye on these areas where errors can occur:
Start by looking through the credit accounts (loans, credit cards, etc.) that are listed. Are any of them closed and not being reported as such? Or are there any accounts that you did not open? This could be a first indication of identity theft.
Payment history will make up a whopping 35% of your credit score, so it’s important to look at any late payments or account delinquencies that are being reported. Note how late these payments were (60 days late is more damaging than 30 days, for instance) and how long ago they occurred (the more time has passed, the better it will look).
Credit utilization, or the amount of credit you are currently using in comparison with the total amount available to you, makes up another 30% of your score. Check the ratios for each account as well as for the total, ensuring you are using no more than 10%–30% of your available credit.
Accounts in collections, bankruptcies, liens, and judgments
Next, take a look at any collection activity, bankruptcies, liens, or judgments on your report. Is this information correct? Are there accounts that have been turned over to collections you weren’t aware of? Make sure all listed dates are accurate as well — these items fall off your report in seven years and have less of an impact over time.
Hard credit inquiries
Hard credit inquiries appear on your report when you attempt to acquire new credit, either in the form of a loan or credit card. These appear only after paperwork has been signed and the official request has been made; therefore, it’s important to make sure each of these inquiries was of your own doing — not the result of identity theft.
What do you do if you see an error?
If you spot what you believe to be inaccurate information on your credit report, it’s important to begin by alerting the responsible credit-reporting agency.
All three agencies now allow disputes to be reported online (Experian is strictly online), but it still may be best to go the written-letter route to include all information necessary to support your claim. (If you choose snail mail, be sure to send by certified mail and with delivery confirmation so you can establish a paper trail.)
When writing your letter, include the items you are disputing, the facts surrounding why you believe this information to be inaccurate, and a clear removal request. Make sure to also include copies of all items that support your claim. Details and specific information are key.
Once the credit-reporting agency has received your claim, you should receive a response within about 45 days stating whether your claim has been substantiated and the information changed, or if it hasn’t been proven and will remain the same.
If the latter occurs, you have the option of filing a complaint with the Consumer Financial Protection Bureau (CFPB), at which point the credit agency must provide a response to both you and the CFPB.
Now that you have a firm grasp on understanding a credit report, it’s important to stay on top of it. This is the easiest way to ensure you aren’t the victim of identity theft and your credit is in tip-top shape, whether you’re hoping to pass a credit check on your new apartment or it’s time to buy a home.
When did you last check your credit reports — and did you successfully remove errors? Share your experiences in the comments below!