OK, so now you have your credit reports and wow -- there are an awful lot of numbers, abbreviations and terms you've never seen before. Trade lines, charge-offs, account review inquiries -- how do you read this thing?
First, there are three major credit-reporting agencies in the United States: Experian, TransUnion and Equifax. Everyone is entitled to a free copy of their three credit reports -- one from each of the credit reporting agencies -- every 12 months under federal law.
Get all of them
"Looking at one is a useless endeavor; you need to look at all three," says Howard Dvorkin, president of Consolidated Credit Counseling Services in Fort Lauderdale, Fla. "People tend to pull one and think everything is the same on all of them. That's not normally the case."
The reports will have different information because it's a voluntary system, and creditors supply credit information to whichever agency they want -- if any at all.
Maxine Sweet, vice president of consumer affairs at Experian, recommends ordering the report directly from the credit bureau instead of asking a buddy who works at a bank to pull one for you. Those are written for the credit industry. The one you get from the credit bureau is "much more consumer-friendly," says Sweet.
The report is easier to read because it won't list the creditor's member numbers and other information relevant to only the lender. A lender's report also will lack a complete list of every company that's pulled your credit information for promotional purposes, like preapproved credit card offers.
"If you compared the two reports side by side, the consumer one will have a couple more pages of information," says John Ulzheimer, credit expert at CreditSesame.com.
Understanding the setup
A free credit report is divided into four sections: identifying information, credit history, public records and inquiries.
information is just that -- information to identify you. Look at it closely to make sure it's accurate. It's not unusual for there to be two or three spellings of your name or more than one Social Security number, Sweet says. That's usually because someone reported the information that way. The variations will stay on your credit report; "If it's reported wrong, we leave it because it might mess up the link. Don't be concerned about variations."
Other information might include your current and previous addresses, your date of birth, telephone numbers, driver license numbers, your employer and your spouse's name.
The next section is your credit history. Sometimes, the individual accounts are called trade lines.
Each account will include the name of the creditor and the account number, which may be scrambled for security purposes. You may have more than one account from a creditor. Many creditors have more than one kind of account, or if you move, they transfer your account to a new location and assign a new number. The entry will also include:
- The kind of credit (installment, such as a mortgage or car loan, or revolving, such as a department store credit card).
- Whether the account is in your name alone or with another person.
- Total amount of the loan, high credit limit or highest balance on the card.
- How much you still owe.
- Fixed monthly payments or minimum monthly amount.
- Status of the account (open, inactive, closed, paid, etc.).
- How well you've paid the account.