A Quick Guide to Reading Your Credit Report!

Credit Reports can be a challenge for anyone to read. They come in many different formats, and unless you are accustomed to reading them, can be quite overwhelming to decipher.

Lending institutions use the information in your credit report to decide if they are going to give you a loan. Your ability to understand what they are basing their decisions on is a CRITICAL part to taking control of your finances. Unless you understand what your credit report says, it can be difficult to develop a solid plan off attack to improve your credit score.

There are seven key components to your credit report. They are: personal information, credit summary, public records, credit history, inquiries, creditor information, and your credit score.

Personal Information:

This includes your name, social security number, address, previous address and employer. If you have a previous name, such as a maiden name, that will also be included in this section. (Personal information that is NOT included in your credit report includes your salary, how much money you have in the bank, your criminal record and whether or not you receive government assistance.)

Credit Summary:

This is an overview of the number off accounts you have, how they are paid and how much credit you currently have available to you.

Public Records and Collection Accounts:

This section will include bankruptcies, foreclosures, judgments, liens, garnishments and accounts that have been turned over to collection agencies.

Credit History:

This section includes your payment history on your current and past accounts. Your accounts will report as being paid on time, or paid 30, 60, 90 or 180+ days late. The three credit bureaus will report this payment status in their own unique way. For example, Equifax with report a revolving account that is paid on time as an R1, and installment account as I1. Accounts that are 30 days late are reported R2 and I2, 60 days accounts are reported R3 and I3 and so on. Accounts continue to report for seven years from the date of last activity. Also included in this section is the date that the account was opened, the type of account, the monthly payment, current balance, and credit limit.

Inquiries:

Inquires that are made in response to your application for credit will show on your credit report. These are called hard inquires and they will lower your score. Excessive inquires show creditors that you are aggressively seeking credit, which may mean that you are in financial trouble. Additionally, lenders have no way of accurately calculating your debt rations because they can not tell how many accounts you have opened that are not yet reporting to your report. Soft inquires will NOT appear on your credit report and do not hurt your score. These include when you check your own credit and inquires made by employers and insurance companies.

Creditor Information:

This section contains the contact information for all creditors that are reporting to your credit bureau. Most lenders will have a phone number in this section, but sometimes this section will only include an address and state "mail only", meaning you can only contact them via the mail.

Your Credit Score:

This is a key part of your credit report, and the single most important factor to lenders. Your credit score is a number that gives lenders an overall picture of your credit risk. It is a number between 340 and 850. Anything over 720 is considered excellent.

By understanding the key sections of your credit report, you are better prepared to manage your credit.

Wendy Polisi is the founder of Credit Repair College. Credit Repair College empowers America's to take control of their financial future by learning about credit repair, thrifty living and budgeting.