credit

How to read a credit report

The reports will also show your recent payment history and whether you paid as agreed each month. TransUnion and Experian credit reports also include the amount of each payment. Other comments under an account might include account closed by consumer, internal collection, charged off or default.

"Charged off means the creditor has given up, thrown in the towel," Ulzheimer says. "He's made efforts to collect and written it off."

The next section is public records, which "is never a good story," Sweet says. "If you have a public record on there, you've had a problem."

The report lists only financial-related data such as bankruptcies, judgments and tax liens, all of which can trash your credit. Arrests, lawsuits and other information aren't included.

The final section is inquiries. That's a list of everyone who asked to see your credit report.

"Any time anyone gets into the report, it'll post an inquiry," Ulzheimer says. "If you call the credit bureau and ask for a copy, it will be on there. It's a very detailed entry record. It's great for the consumer."

There are two types of inquiries, hard ones and soft ones. Hard inquiries are initiated by you when you fill out a credit application. Soft inquiries come from companies that want to prescreen you for credit offers, potential employers or current creditors monitoring your account. The soft inquiries only show on reports given to consumers, says Sweet.

Fixing mistakes

There's a change you may find a mistake in your credit report. One in five consumers had an error on their credit report from the three major credit bureaus, according to a 2013 government study. One in 20 had an error so bad that it cost them more money on loans or insurance.

If you find a mistake -- such as an account that isn't yours or an erroneous amount -- you'll need to dispute it with the credit bureau. The reports list a Web address for the credit bureaus' online dispute form.

The credit bureaus will investigate your dispute by contacting the creditors, which have 30-45 days to respond to your dispute. The disputed item will show up as disputed on your credit report until it's resolved. If you feel your dispute is not handled well, you can file an online complaint with the Consumer Financial Protection Bureau, which will help facilitate the dispute process.

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