Consumer credit reports are an essential part of the U.S. credit system. They can make or break your ability to qualify for loans and credit. They also provide all the information that’s used to calculate your credit score. That makes maintaining a clean and error-free credit report crucial if you use credit. Unfortunately, mistakes do happen, so it’s important to review your reports regularly and dispute errors when they occur. This guide will teach you how!
What is a credit report?
A consumer credit report is basically exactly what it sounds like. It’s a report that contains facts about your debt payment history. Lenders use this information to determine if you qualify for loans and credit cards, and what interest rate you pay.
By regularly reviewing your credit report, you can:
Identify reporting errors, so you can dispute the information with bureaus to repair your credit
Spot potential signs of identity theft, such as new accounts that you don’t recognize and credit inquiries you did not authorize
Understand negative items that could be contributing to a lower credit score, so you can take strategic action to build credit
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How to Read a Consumer Credit Report
Your credit report can make or break your ability to qualify for loans and credit cards. It helps lenders understand your risk as a borrower and assess your creditworthiness during financing decisions. With so much riding on your credit report, it’s critical that you’re able to read and understand your credit report. This video walks you step by step through your credit report so you understand the information in contains.
Welcome to the Game of Good Credit! If you want to win, you need the right strategy and you must be able to move effectively through your credit report. From start to finish, there are six sections that can come into play.
The starting point is personal information. This includes basic details likes your name, address, employers and aliases. As you move along, check that everything is correct – especially for aliases. Because if you get confused for another player it can set you back significantly.
The second section you pass through is also the largest – credit history. You move through each account to review payment history and account status. Remember each late payment sets you back, bit by bit. And the longer an account goes unpaid, the further it will put you back. Accounts in good standing with a positive payment history help you move forward. But if you fall behind you can also land on other negative items, like collections, charge-offs, repossessions and foreclosure, which can really cost you credit-wise.
The next section is where you encounter credit inquiries. Too many hard inquiries from authorized credit checks can set you back here.
The next section covers public records, like civil lawsuits and court judgments. If you don’t have any of these records on file, this section may not appear and you can skip ahead. But if you owe something like bad child support, it can slow you up. And you may have to payout in order to get moving again. This section also includes third-party collection accounts. These can put you back in a big way, so it’s best to avoid them.
Next you’ll run into a section for consumer statements. If you lose a dispute to remove a negative item, you can add a consumer statement that explains what happened. The effect of these statements on your game is always neutral.
Finally, you’ll encounter a summary of your rights under the Fair Credit Reporting Act. This isn’t really part of the game, so much as a list of rules for fair gameplay. If you read this it helps you understand your credit better so it’s easier to win. You can learn about all of the rights protected by federal law, so it’s easier to win and achieve the best score possible.
It’s important to note that each credit bureau has their own version of your credit report. So, fields may not be exactly arranged the same from one bureau to the next. While the board may look a little different, gameplay should be the same.
For more information on winning the game of good credit, visit ConsolidatedCreidt.org.
How to read a credit report
Each bureau maintains their own private version of your report, so they present the information differently. However, they all contain the same six basic sections.
Personal information:Your name, current and previous addresses, spouse’s name, date of birth, Social Security Number, telephone number, place of employment, etc.
Credit history:Name, identification number, date account was opened, credit limits, current balance, monthly payment amounts, credit and debt repayment history, and payment frequency among other things.
Credit inquiries:When you run a credit report, inquiries appear on your report. Bankruptcies, judgments and lawsuits also appear on it. This reveals credit activity to your creditors. This also lists everyone who has asked to see your report in the past two years.
Public records:Includes things like bankruptcy filings, tax debt issues with the IRS or your state, and third-party collections accounts.
Consumer statements:These are statements of 100 words or less written by you explaining any circumstance that has impacted your credit history.
What should I look for on my credit report?
You really want to look at everything to make sure is correct. However, your main focus should be on negative items. These are things like:
Missed payments
Settled, closed or inactive account statuses
Collection accounts
Negative public records, such as court judgments
These are all the things that a creditor would consider as they review your application for new financing. Negative items make you less “creditworthy” because there’s a higher risk that you won’t pay the debt back.
Keep in mind that almost all negative items eventually expire – nothing in the credit world lasts forever. Negative items fall off naturally after a certain amount of time.
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Game of Good Credit: When Do Negative Items Expire?
In the Game of Good Credit, negative credit report items hold you back from achieving the score you want. This video explains how long negative items remain on your credit report. Luckily, in the world of credit, (almost) nothing lasts forever. Learn when you can expect negative items to drop off and what you can do in the meantime to offset the damage.
Welcome back, contestants, to the Game of Good Credit!
Do you have the right strategy to win? The game of good credit is easy to win with the right moves. And winning means you achieve a good credit score that helps you get approved with low rates. But some actions you take can set you back.
By law, filing for bankruptcy hits you with a penalty that sets you back 10 years from the date of filing. Except if you file for Chapter 13 – the bureaus stop the penalty after 7 years. This minimizes the setback so it’s easier to recover.
Things that happen outside your credit file can also affect your game – civil suits, court judgments and records of arrest can come up. These public records remain for 7 years from the date of entry OR as long as the current governing statute of limitations allows – whichever is longer.
Unpaid taxes can also set you back. A paid tax lien sets you back seven years from the date the lien was paid. On the other hand, if you leave a lien unpaid it can stop you in your tracks and remain indefinitely until you pay it off. That is, except in Experian’s game where the penalty for unpaid tax liens ends after 15 years.
Every time you pay on time it creates a positive space that stays on your credit forever and pushes you ahead. But each time you pay more than 30 days late, it sets you back 7 years from the date the payment was missed. And the longer a debt goes unpaid, the more it sets you back. If you let it go unpaid too long, the creditor writes off the account and changes the status to charge-off. Charge offs also set you back 7 years.
There is one exception to that rule… If you default on a federal student loan and then bring it current, any negative actions from the late payments disappear. But for all other debts, charge-offs are usually sold to collections, which creates ANOTHER trouble space that causes issues for 7 years. So, letting a debt slip into default is almost a double or triple whammy to your game.
However, don’t believe a collector if they say they have ways of ruining your credit game forever. That’s just not true. Nothing you do can get you kicked out of the credit game forever. Any penalty you encounter will only set you back. But you can offset these setbacks by taking positive actions that help you move forward. So even if your period of financial distress puts you back at Square One, you can start again and get right back in the game.
For more information on winning the Game of Good Credit, visit ConsolidatedCredit.org
Don’t let challenges with debt ruin your credit! Talk to a certified credit counselor to find solutions that will stop damage to your score.
The credit bureaus create a consumer credit report whenever the consumer has a debt they are obligated to repay. In most cases, your credit report is created the first time you apply for a loan or a credit card. This creates an account that generates your credit history – a history of payments made on that debt.
In rare cases, the bureaus may generate a report even if you’ve never had a loan or a credit card. This happens if you have a bill or payment obligation that goes into collections. For instance, if you don’t pay your utility bill or have an out-of-pocket medical expense that you thought was covered by insurance. Collection accounts are effectively debt you must repay. So, this can also create credit history, because it’s a debt that you owe.
How do I get a free credit report?
By law, you can download your credit reports for free from each credit bureau once every twelve months.
Answer a few security questions, based on information contained in your report to verify your identity
Use the portal to download your report from each bureau; you can download one report at a time or all three at once
How do I prevent credit report errors?
Errors can occur, but there are steps you can take to prevent them. The most common reason for reporting mistakes is that a creditor gets you confused with another consumer.
Always use the same name on credit and loan applications. For instance, if you use your middle initial on one application, don’t spell out your middle name on another.
Provide your Social Security number on all applications. This prevents mix-ups with other consumers with the same or a similar name.
List current and previous addresses for the past five years. This helps bureaus link together your credit history
How long do credit inquiries stay on your credit report?
There are two types of credit inquiries – hard and soft. Soft inquiries do not affect your credit, but hard inquiries do. A hard inquiry happens when you authorize a credit check as you apply for a new credit card or loan. These hard inquiries remain on your report for two years. However, they only influence your credit score for six months.
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When Do Credit Inquiries Decrease Your Credit Score?
In the Game of Good Credit, only some credit inquiries can affect your credit score. You can check your credit as often as you want without decreasing your score. Inquiries from employers, insurers, landlords and even for pre-approved credit offers don’t count against you either.
Welcome, to the Game of Good Credit. Winning at the Game of Good Credit means taking the right actions to achieve a high score. So, let’s look at how credit inquiries can affect your score.
A credit inquiry happens when you authorize someone to run a credit check. Creditors and lenders run credit checks when you apply for financing. They look at your gameplay history to assess your creditworthiness.
In addition, employers, landlords and even insurance companies can run checks. They review your credit to evaluate risk. Even when you check your credit, it creates an inquiry on your report.
For the most part inquiries have a neutral impact on your credit game – they don’t move you forward or back. You can check your credit as often as you want and it won’t create a negative item or set you back. Employment and insurance related inquiries have a neutral impact, too. And even when a creditor checks your credit to extend a pre-approved offer the effect is neutral. So, while all these inquiries appear on the field, their effects are neutral. That’s why these are referred to as “soft inquiries.”
However, if you apply for a loan or credit card, that creates a “hard inquiry.” One or two hard inquiries within a certain time is fine – the effect on your game is still neutral. But if you have credit applications – one after another – within a six-month period, then it becomes an issue that can set you back from the high score you want.
If you apply for a mortgage or car loan and shop around, each lender runs a credit check when you request a quote. HOWEVER, in this case you don’t get penalized for comparison shopping. All the inquiries get grouped together so the effect is neutral. Just keep in mind that the same thing doesn’t happen with credit cards or other types of loans.
For more information on winning the game of good credit, visit ConsolidatedCredit.org
How often are credit reports updated?
With today’s technology, many items that appear on your report appear the same day the event occurred. For example, if you authorize a credit check when you apply for financing, the credit inquiry is usually reported within 1-2 days.
Creditors report missed payments every 30 days. If you pay a credit card late buy 5 days, that should not appear on your credit report. However, if you’re more than 30 days late, then the creditor counts the payment as missed. They report that information to the bureaus, then it appears on your report in the next month. Missed payment notifications run 30, 60, 90 and 120 days.
Then at 180 days, the creditor moves the account to charge-off status. This also would appear on your report within the next month. If you pay off the account or settle with the creditor, you should see that information within the next month as well.
Have a question about your credit report? Ask our certified credit counselors now!
