How to Understand Your Credit Report

It is a good idea to know what your credit score is and to have a look at your credit report at least once a year. At some point in your life, you might have a dream or goal that can only be realized by getting the credit you need. So much of your financial security depends on having a good rating that you should work toward having the best score possible. You should order a copy of your report and take a careful look at it. In the USA tt is possible to obtain a copy of your report online. Where you get your report is not as important as what you do with the information. If you cannot readily make sense of what you are seeing then you need to learn how to understand your credit report.

The mistake many frustrated consumers make is to look only at the credit score ranking. When they see the score, they think the three numbers of their credit report score is all there is to their credit worthiness. There is more to your credit score than just the ranking. Two examples demonstrate how a company might view your history. In the first example, you have several credit cards, a car loan, and a mortgage all of which you pay on time. A company might still refuse you a large amount of credit because paying it back along with all your other obligations would put you in too much debt. In the second example, you only have one credit card. You pay it off carefully, but while this gives you a good ranking it does not really tell a lender how you might deal with multiple loans or larger loans. In the first case, your credit would seem ‘too deep’ while in the second your credit would be seen as ‘too shallow’.

Part of learning how to understand your credit report is to study it carefully. Poor credit scores are seen as 300-399, fair is 400-599, good credit is 600-849, and a score of 850-930 is a very good credit as far as rankings go. It is only natural to look at this first, but the rest of the report is just as important. Take a few minutes to make sure the information at the top is correct. It should have your name, current address, social security number, and your date of birth. If you are married it should include your spouse’s information if you have joint accounts or use credit together. Do not just glance at this information; diligently make sure it is correct. A mistake here can cause trouble later, and if there is some discrepancy in the address, name, or date of birth it could indicate that someone other than you might be using your credit. This is called identity theft.

The next section is a summary that shows your scores from all three credit bureaus and your late payment history for the last 24 months. The next section shows public actions such as bankruptcies and liens taken against you.

One more important aspect to note is the Credit Risk Score which explains your score reporting at length. This will give details such as having too many credit inquiries in the last 12 months’, or having too many open accounts.