Getting your credit report is one of the best things that you can do if you plan to get a loan of any kind in the future. Lenders will always check your credit rating before even considering you for a loan. And obtaining a copy of your credit record can help you fully inform with how your credit stands and take steps to fix it if it is necessary.
But once you’ve got the report you might get confused as there are a lot of numbers, abbreviations and terms you need to decipher. How do you read and understand terms such as trade lines, charge-offs, and other terms? Read on to understand your report codes and then find ways to fix errors on the record and improve your credit rating.
What is a Credit Report?
Your report is a document that lists your credit and repayments history and any public records such as judgments, bankruptcy filings and tax liens. It is a detailed information of all your credit activities that is prepared by consumer credit bureaus and sold to creditors, insurers, employers or other businesses.
Consumer credit reporting agencies compile your past credit activities based on the information they get from your creditors. They record where you live, what you do for a living, where you have applied for credit and how you pay your mortgage, rent and car payment. This information is sold to prospective lenders and the other businesses that use it to assess your applications for credit, insurance, or employment.
Information On Your Credit Report
The type of information included on your credit record is personal identifying information, credit history, public records and inquiries. Here is a brief description of each item:
1. You will have the personal identifying information such as your name, current address and date of birth as well as any of your past addresses. All of your past and present employers will also be recorded on your report.
2. The credit history section covers everything related to any financial transactions that you have entered into. This includes each account you made with your creditors along with the name of the creditor and the account number.
Every loan that you have ever had will be recorded along with the dates that they were opened, the type of the credit, the amount of the loans, how much you still owe, and how well you’ve paid the loans. There will be notes about any late payments or defaults of loan repayments like: never pays late, typically pays 30 days late, etc.
3. In the public records section there are details of bankruptcies, taxes unpaid or outstanding, and any problems with collection agencies, if any. This is the type of information that you don’t want to be there because it will affect your credit score and make it hard for you to get credit.
4. Inquiries section is a section that lists everyone who asked to see your credit history. Each time you apply for credit, your credit bureaus will place an inquiry and who has made it at the bottom of your reports.
Any lender will be able to see when you have tried to get credit from looking at inquiries as it records the times you apply for loans. Potential lenders look at too many inquiries as negative points and they base part of their credit decision on that info.
As your credit score, which determines the interest rates on your loan, is drawn up from your credit report make sure that you regularly check the reports and fix any errors found. There are times that credit bureaus such as Equifax, TransUnion and Experian, may have inaccurate information about you and this will matter much when lenders will give their decisions on your loan application.