The Anatomy of a Credit Report
Lenders use your credit report as an indication of how you may handle future debt, credit cards and loan repayments. It’s important to understand how to read your report so you can make adjustments to meet your financial goals.
Each credit report contains five main sections:
1. Personal Information
This includes your name, address and Social Security number. Other information included may be employment history and your date of birth.
2. Public Records
This includes any credit-related issues that have been processed through the court system. This may include judgements (court decisions where you own money), tax liens, bankruptcy, delinquent child support payments and federal debt.
3. Potentially Negative Accounts
This section lists debts that a creditor has sold to a collection agency when an account became past due. The U.S. Fair Credit Reporting Act of 1997 requires the credit reporting agency to provide specific account information.
4. Creditor/Account Information
Here you will find an updated report by most of your creditors with current and past credit by account type. The account ownership and responsibility will also be included.
5. Inquiry (Hard/Soft)
Hard credit inquiries are typically submitted for loans mortgage and credit card applications. Soft credit inquiries are submitted for pre-qualifications, account maintenance by existing creditors or personal credit checks. Hard inquiries can cause a temporary dip in credit score, while soft inquiries have zero impact on your score. Both types of inquiries stay on your credit history for 24 months.
GOOD TO KNOW
Creditors report the timeliness of payments each month based on your agreement with them. A good credit history is important when you are being considered for a loan. That means you want your credit rating to be “Current” or “Paid on Time” for every account on your credit report.
Types of Credit
Your credit report will also carry the types of credit you have and how it was paid. This includes:- R - Revolving Credit
This is a line of credit which can be borrowed from more than once, such as a credit card. - I - Installment
This is a loan with a specific payment for a specific period, such as a car loan. - O - Open Account
This is an obligation that must be paid in full every 30 days.
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