Money Management

Making the Budget Commitment

Reading and Understanding Credit Reports

Information contained in credit reports dictates the financial circumstances that consumers find themselves in.  Many consumers have never seen or read their own credit reports.  Some have simply never taken the time to do it.  Others have not because they are intimidated by or afraid of the information that might be recorded there.  Reading and understanding a credit report is not a difficult process.  Not doing so could be detrimental to one’s financial health.

Step #1:  Request a free copy from Annual Credit Report
Federal law allows consumers to request 1 free copy of their credit report from each of the 3 credit reporting agencies (Equifax, Experian, Transunion) during each 12 month period.  By spreading requests for 3 reports out during the year, consumers can check their credit reports freely at least once per quarter.

Step #2:  Read the report
Each credit reporting agency has its own format for the printed reports.  All reports will contain the same categories of information but they will not necessarily look the same. All printed reports will contain keys/legends so that consumers can understand the information listed in the report. 

Look for the following sections:

PERSONAL INFORMATION – This section will include information about the consumer’s name, address, date of birth, SSN, maiden name, employment history, etc.  Anything that is used to accurately identify the consumer can be included here.  This section may also contain any alerts that have been attached to the file and/or any personal statements made by the consumer concerning the file or its contents.

CREDIT INFORMATION – This section includes all information pertaining to the consumer’s credit accounts, past and present.  Accounts may be listed chronologically, by status, by type, etc.  Some agencies include a credit summary in this section.  In some way, all accounts listed in this section will be labeled as open or closed as well as in good standing or past due.  Specific information about each account (opening date, credit limit, current balance, payment history, reporting date, etc.) will also appear in this section.  Accounts which fall into any of the following categories are also listed in this section:  Currently Past Due; Negative Accounts, Collections, Public Records (i.e. bankruptcies, liens, judgments, etc.),

CREDIT HISTORY REQUESTS – This section lists all inquiries or requests for the consumer’s credit report.  The request listing includes the name, address, phone number and request date for each request.  If the consumer requests to view his own credit report, that is listed but it is not factored into any formulas used for assigning a credit score.

CREDIT DISPUTES – Each credit reporting agency must provide specific information about how to dispute information contained in a credit report.  These disputes can usually be filed online or in writing by regular mail.

CONSUMER RIGHTS – Each agency must also summarize consumer rights included in the Fair Credit Reporting Act.

Step #3:  Dispute and/or Change Inaccurate Information
If information contained in a consumer’s credit report is inaccurate or false, the consumer must notify the reporting agency.  Upon notification of the information in dispute, the agency must investigate the dispute and provide the consumer with a report of their findings.

Step #4:  File the Report for Safekeeping

It is a good idea to keep a copy of any current credit report until an updated one is requested.  This will help to identify any potential errors and/or abuse of credit information.

In the era of identity theft, laziness and ignorance is no longer an excuse to not pay attention to credit reports that are determining consumer’s financial futures.  Get a report and read it today!