Understanding your credit report is the first step toward a better financial future. Your credit score is dependent on the information housed within its five main sections. The Fair Credit Reporting Act (FCRA) requires the three credit bureaus (Experian, Equifax and TransUnion) to provide you with a free copy of your report each year. So, what can you (and your creditors) learn from your financial past?
Section 1: Personal information
This section includes your:
- Current and past addresses
- Current and past employers
Many creditors look to this section to get an idea of your personal habits. For example, has your current position been long-term? How often do you move? These attributes may help decide your risk level.
Section 2: Credit Summary
This section provides an overview of your current and past accounts. It outlines account numbers, balances, and statuses (e.g., open, closed, current or delinquent). Below are a few examples of included items:
- Installment accounts
- Revolving accounts
- Mortgage loans
- Collection accounts
- Public records such as outstanding debt or bankruptcy citations
- Credit inquiries for the last two (2) years
Section 3: Account History
This section provides the details of your account information. Each item contains a multitude of history, including:
- Creditor name or institution
- Account number
- Account type, e.g., student loan, mortgage payment, etc.
- Responsibility, i.e., whether the account is sole or joint, and additional authorized users
- Minimum payment amount per month
- Date opened, e.g., “10/08”
- Your creditor’s last update with the credit bureau, e.g., “updated on 3/10”
- Loan amount
- Maximum credit limit
- High balance history, i.e., the highest amount charged on your credit card
- The remaining amount owed (at the time of reporting)
- Past due amounts and collection accounts (at the time of reporting)
- Payment status and history (e.g., current, past due, etc.)
Section 4: Public Records
This section includes public records, often matters adjudicated in court, relating to your credit history. Items such as tax liens, court records and judgments, outstanding child support balances and bankruptcies are all listed. Depending on the citation, these negative items may remain on your credit report for 7-10 years. A healthy credit score means keeping a clean Public Records section.
Section 5: Credit Inquiries
This section outlines all requests made to view your credit report for the last two (2) years. Potential lenders may request a copy of your report before deciding to work with you. As such, their name and date of inquiry appear in this section. Keep in mind that excessive inquiry requests can negatively affect your score. Be mindful of who you allow to view your credit report, and how often.
Knowing the Facts
After reviewing your credit report, it is important to verify every piece of information. While creditors and credit bureaus have a responsibility to report fairly, it is your job to spot their mistakes and take steps to correct them. Be proactive about your credit score; it will make all the difference.