How To Read and Understand Your Credit Report?

Your credit score has a major impact on your interest rates and your ability to acquire loans, refinance existing ones, rent or buy a house, and a number of other things. This is why it’s so important to be able to check your credit score thoroughly and periodically.

 

Credit experts recommend that you check your credit score at least once a year or more in unique situations. Unfortunately, many people have difficulty understanding what certain things on their credit score actually mean, let alone navigating through it. We’re here to give you some tips on how to better read and utilize the information on your credit score to help you financially.

 

 

What’s On Your Credit Report?

There are a few different elements that you’ll find on your credit report, typically separated into a few different groups including personal, public record, and creditor information.

Your personal information is going to include your name, your social security number, date of birth, employment history, and address..

 

Your public information includes judgements, liens, and bankruptcies.

Your creditor information is where you’re going to find the bulk of your important data. It will show you the status of your accounts, who those accounts belong to, the balances, recent payments, past due information, and your credit limit.

 

 

What Are Adverse Accounts?

Adverse accounts can have a negative effect on your credit. An adverse account might appear because of past due payments, outstanding balances, or more. Adverse accounts are removed after seven years.

Accounts labeled as satisfactory accounts are accounts that have been paid off on time.

 

 

Different Accounts

Revolving accounts are typically credit cards. The cool thing about revolving accounts is that you don’t have to pay them every month in full. You can instead revolve your credit and pay interest on those revolved amounts.

 

Installment Accounts are loans most of the time and are those that have fixed payments over fixed periods of time.

Open Accounts are the least common type of account, though you have to pay your balance in full at the end of each billing cycle. Those payments, however, can change each month.

 

 

Credit Inquiries

The Credit Inquiries section includes businesses or individual entities who have reviewed your credit report. This might include banks, mortgage lenders, or student loan lenders, depending on your specific history.

Inquiries are typically separated into a few different categories:

 

 

 

Hard Inquiries

Hard Inquiries are those that are made by different lenders when you apply for loans or lines of credit. When applying for a loan or dealing with hard inquiries, you don’t want to have too many within a short period of time, as that can negatively affect your credit score.

 

Soft Inquiries

Soft Inquiries are those that are made by you when you check your own credit or when an agency pre-approves you.

 

Credit Report Codes

Having an understanding of different codes on your credit score can help you to read it with ease. Here are a few must-know codes:

 

PAID – The account balance has been paid off in full

 

CHARGOFF – An unpaid balance has been charged off and the creditor is no longer looking for you to pay off your balance.

 

CURR ACCT – This current account is in good standing

 

CUR WAS 30-2 – This account is current, though has been over 30 days late two times

 

COLLECT – This account has has been sent to collections; very past due

 

 

Conclusion

Reading your credit score doesn’t have to be hard. Follow our little guide, remember the terms, and you’ll be on your way to successfully reading and understanding the information that can be useful to your financial future.

 

Do you have any tips or tricks on reading your credit score? Let us know in the comments!

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