How to Read a Credit Report


Building and maintaining your credit history takes time and dedication. While there are many things you can do when shooting for that perfect 850 FICO score, checking your free credit report every year from is among the best personal finance habits. Once you have a copy of your credit report, let's review step-by-step what to look for.

1. Check your personal information

First things first: Make sure that your credit report correctly shows your name, Social Security Number (SSN), phone number, and address. The three credit bureaus (Equifax, Experian, and TransUnion) keep track of all variations of names and SSNs reported as belonging to you.

You can easily rectify a small error, such as a misspelling, absence of a hyphen in a last name, or transposition of a street number by contacting the credit bureau and providing supporting documentation. Keep an eye out for information that you don't recognize at all — this may be a sign of identity theft. (See also: Don't Panic: Do This If Your Identity Gets Stolen)

2. Verify it's really you

Even after checking that your full name and address are correct, you may recognize some accounts on your report that belong to somebody else in your household. In this case, you may be a victim of a mixed file — when the credit information of two individuals sharing the same name gets mixed up in a single report.

This can be a potential issue in multigenerational homes with several family members sharing the exact name. For example, John Smith Jr. opens a store card but the credit bureaus list the account on the father's report (John Smith Sr.) instead of the son's. That would be a mixed file.

3. Watch out for errors in account ownership

Going back to the example of the father and son, the father may have decided to open the store card in his name, and then add his son as an authorized user, or vice versa. Make sure that reported accounts are only the ones for which you are the owner.

4. Look out for accounts incorrectly reported as late or delinquent

Unless you were more than 30 days past due, you shouldn't have a late or delinquent note on any debt. So, report this right away. (See also: How to Clear Old Debt From Your Credit Report)

If you recently made a payment and your account is now current, keep in mind that there is often a lag when credit bureaus report such incidents. Follow up with the company owning your debt and verify that it has notified the credit bureaus. Keeping your accounts current is critical, because payment history makes up 35 percent of your FICO credit score.

5. Validate key account dates

The most important date to verify is the date that an account was opened, because the length of your credit history accounts for 15 percent of your FICO credit score. Other important dates to verify are date of last payment, and date of first delinquency.

6. Beware accounts listed twice

It can happen! Possible sources of this error are when you upgrade a credit card with the same company, or refinance a loan with the same financial institution. Another possibility is that somebody opened an account on your behalf without your consent.

You also need to watch out for companies transferring the ownership of a delinquent account over to collections agencies. While you're still responsible for paying back what you owe, you're definitely not liable to receive a double (or triple!) whammy on your credit score for the same mistake.

7. Double check credit limits and balances

Double check that your account balances are within a range you recognize, and that your credit card limits are up to date. After all, 30 percent of your FICO score is based on your credit utilization ratio — your total credit card balances divided by your total credit card limits. For example, an outstanding balance of $4,000 with total credit limit of $15,000 would put your credit utilization ratio at 26 percent. The more available credit you have, the lower your credit utilization ratio will be. Most experts recommend this ratio should not exceed 30 percent.

8. Keep an eye on public records

A bankruptcy isn't the only reason you might end up with a public record on your account. Unpaid driving violations, library fines, or other penalties from money owed to the government will come to haunt you on your credit report. Depending on many factors, public records can stay on your report for up to seven years, even after taking care of them. This means that the best time to take care of them is now. (See also: 4 Credit Report Mistakes That Could Be Costing You Big)

9. Corroborate that corrected information has been posted

Chances are at some point, you'll eventually have to report an error. When this happens, always follow up to check that the incorrect information has been replaced and corrected.

What to do if you find an error

If you find any errors in your credit report, refer to the instructions on your credit report to dispute inaccurate or missing data. Here is a useful template from the Consumer Financial Protection Bureau to initiate disputes with the credit bureaus by mail or fax. Or, you can file a dispute online with Equifax, Experian, or TransUnion.

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