Key Points to Reading a Credit Report
Reading and understanding a credit report can be a difficult mission for many people. There are often things included that we simply don’t understand. We have learned what contributes to our credit and how to improve our score, but people sit staring blankly at their credit report trying to make sense of the words and numbers. If this is the situation that you have been in, please read below to get a better grasp on the red lights you should be looking for on your credit history.
Identifying Factors:
This part of your credit report will have personal information about you, such as addresses, social insurance number and other sensitive data.
- Be sure that all information is correct.
- Any aliases will affect your score.
- Look over your date of birth to make sure it is accurate.
- Carefully review your employment history, as well as current and previous addresses.
- If you see any discrepancies please investigate it further.
Negative Items:
Delinquencies affect your credit score greatly. You should look at two factors:
- How long ago was the late payment?
- The more time you have not missed a payment the less effect to your credit.
2. How late was the payment?
- The later the payment the more negative effect to your credit
| Past Due | Action |
|---|---|
| 30 Days | After 30 days delinquent the lender will report to the credit bureau. The lender has the option to raise your interest rate to the default rate. |
| 60 Days | The lender can sell to a collection agency or third party. |
| 90 Days | The lender can take legal action aganinst you for the unpaid debt. |
High Debt to Credit Limit Ratio
There are two ways the credit bureaus take this into account:
- The balance on the card to the credit card limit.
- For instance a card with a $300 balance and a limit of $1,000 is a 30% ratio.
2. All debt on all cards verse limits on all cards.
- For example you have 3 cards with a total line of credit on $10,000. Your total debt is on those 3 cards is $2,000 so your ratio is 20%.
Collection Activity
Collections will affect your credit. The longer they are on your credit report the less affect.
Options are:
- Pay it in full
- Settle
Public Records
- Bankruptcy
- Judgments
- Liens
- Foreclosures
Inquires:
Inquiries are any time someone pulls your credit. There are two types of inquires.
| Type of Inquiry | Explanation | Effect on Credit | Time on your Credit Report |
|---|---|---|---|
| Soft Inquiry | When you check your own credit report. When someone else checks your credit report without your permission. For instance for marketing purposes. | NO | 2 years, but no effect on credit |
| Hard Inquiry | You have applied for credit by submitting an application and given someone permission to pull your credit. | YES | 2 years, but is only used for calculation for 1 year. |
