Understanding Credit Reports

You likely have been told how important it is to maintain a good credit history in order to obtain credit in the future, and you also probably know that potential creditors and employers pull your credit report to determine your creditworthiness and financial responsibility. One thing you may not understand, however, is how to read your own credit report!

Credit reports contain numbers, codes, and other marks that make it very difficult for consumers to decipher. The following guide will help you to make heads and tails of your credit report.

Your credit report will be different at each of the three main consumer credit reporting agencies – Experian, Equifax, and TransUnion – because each is privy to different information. However, all three list your information in four organized sections: Identifying Information, Credit History, Public Records, and Inquiries.

Identifying Information

The first section on your credit report lists your personal information such as your name, current and previous address, current and previous employer, and spouse. It is possible that there may be incorrect versions of your information, but this is nothing with which you need to be concerned.

Credit History

The second section lists your credit history by your individual accounts, or as “trade lines”. Each account listing should include the creditor’s name, your account number, the date on which the account was opened, and the type of credit:

R – Revolving (such as a credit card)
I – Installment (such as a car loan)

Herein it becomes confusing. Experian lists the status of your accounts in plain English, but on your Equifax and TransUnion report, accounts may be marked by any of the following codes:

1 – Payment is on-time and as agreed.
2 – Payment is 30 days late.
3 – Payment is 60 days late.
4 – Payment is 90 days late.
7 – Payments are being made in accordance with a plan.
8 – Repossession.
9 – Account has charged-off.

Your accounts are rated with one letter and one number. For example, R1 would be a positive mark, while I3 would be negative. In addition, Equifax marks negatives with the symbol “>>>>”.

Additionally, there are more generic FICO codes that may be used to describe your accounts:

O – Open
R – Revolving
I – Installment

0 – Account is approved, but no further rating.
1 through 9 – The same as above.

J – Joint
I – Individual
U – Undesignated
A – Authorized
T –Terminated
M – Maker (Signer)
C – Co-maker (Co-signer)
B – On behalf of someone else
S – Shared

Public Records

The third section lists any matters of public record that are financial in nature, including liens, judgments against you, and bankruptcies. Such marks tarnish your credit report more significantly than anything else.

Inquiries

The fourth and final section lists all inquiries made into your credit. It is divided into two types: hard inquiries, or those inquiries that you authorize for a potential creditor to determine if you are credit-worthy; and soft inquiries, or inquiries made by you for your own purposes or by your current creditors that are not supposed to count against you. Hard inquiries are considered negative, while soft inquiries are not even supposed to show up on reports pulled by creditors.

Conclusion

It may be a bit tricky to discern what your credit reports say about you, but it is important to be aware. Not only is it helpful to know what creditors and employers see when they view your reports, but being familiar with the codes and symbols also can help you to monitor your reports for errors, as well as for suspicious activity that could indicate identity theft.

A key should be included with your credit reports when they are pulled to help you decipher these all-important documents. Your credit has a huge impact on your financial future, so this is something you will want to understand the best that you can.