How to read your credit report

In The Credit Card Cure Ryan Rockwood details a four-step process for eliminating credit card debt. The fourth step is Speedy Credit Score Recovery. Here is an excerpt from the book – about making some sense of your credit report.

Speedy Credit Score Recovery

The first step in a speedy recovery is to get familiar with your credit report. Order it now at www.Annual CreditReport.com. Also, order your FICO score from each of the three bureaus. Either way be sure to get your FICO score from each bureau as well. You will have to pay for these.

How to read and understand your Credit Reports

It is not critical that you become proficient at reading and interpreting your reports. If you have the time and the interest and the inclination to do so…go for it. What is critical is that you gain an appreciation of how you are being reported so that you can be effective in your efforts to recover your score. You can hire others to do the laborious work of disputing errors and correcting mistakes. But, you can’t win at the credit game unless you know the rules. The credit report is a big part of the rules of the credit game.

Ever try to take your credit report around with you when you car shop? Did you wonder why the dealer’s credit specialist would not accept it – but insisted on pulling her own? It’s because they prefer to use a report that is tailored more specifically to their needs – a Merchant Report. This report does more tabulating and consolidating, making it easy for them to grab the numbers that they deem most appropriate for their specific purposes.

Your reports are divided into four section – identifying information, credit history, public records and Inquiries.

The Identifying Information Section identifies you. Wow, who’d of thought? You will see that, in fact several of the entries are misspelled or have slightly incorrect information. That is because some creditor reported incorrectly (typo!) and the bureau retains it because omitting it could break a link in your credit history.

The Credit History Section summarizes activity on all of your “trade lines” or credit lines. Each account will sill show:

• Creditor name
  
• The type of credit it is (installment, revolving, mortgage, student loan, etc.)
  
• When the account was opened
  
• All the names on the account
  
• How much credit was extended – amount of the original loan or credit limit/high balance
  
• How much you presently owe
  
• Amounts past due
  
• Minimum or fixed monthly payment amounts
  
• Account status – open, closed, inactive, paid, etc.
  
• How you paid the account – always on-time, number of lates and when, how late, etc.
  
• Remarks – creditors’ or your own
  

Experian’s report will contain some plain English. Otherwise you need to consult the “terminology guide” that comes with each report to understand the payment codes, etc.

The Public Record Section will list financially-related public records. These include four of the worst entries on your report. These do the most score damage and for the longest time.

1. Bankruptcy – your report will show each of the accounts included in your BK. The information stays on your report for ten years and has a very negative impact on your scoring for the initial 12-36 months.
   
2. Foreclosure/repossession – If you allow the foreclosure process to go full course and the lender takes your home through a sheriff’s sale or trustee sale or your car or other collateral get s repossessed, you will have this on you public records section for 7 years. Similar to the impact of a BK, it is most detrimental in the initial years.
   
3. Tax liens – remain on your report for 15 years…even paid ones stay on for 10. Not pretty.
   
4. Judgments – If your creditors bother to sue you over a debt and they prevail, the court’s “judgment” is recorded. Also, court actions to enforce child support are recorded here as well.
   

    

The Inquiries Section is a list of everyone who has requested your credit report. It’s very detailed and divided into two sections… “Hard” inquiries – ones you initiate by filling-out a credit application and “Soft” inquiries – ones made by companies hoping to offer you a promotion credit opportunity or by existing creditors monitoring your report.

There are mathematical safeguards in the scoring process to protect you from inordinate negative impact from inquiries. The FICO model actually ignores most inquiries. It includes a buffer that ignores inquiries within 30-days of getting a mortgage or car loan.

Take these steps to make some sense out of your reports.

Highlight the information on each report that you question or that you intend to dispute. You may take this action yourself or hire it out. For now, just settle for identifying the disputable information being reported.

• Verify that the identifying information on the report is accurate. That is, even though some of the spelling may be incorrect, make sure that the Identification Section, identifies you and only you.
  
• Verify that there are no accounts on your report that are not (and never have been) yours.
  
• Check payment history and current balances – be sure they roughly agree with your figures.
  
• Check old accounts that remain open or charged-off/unpaid. Check them for dates of last activity to see if they are beyond the Statute of Limitations in your State (or the State in which you incurred the debt).
  
• Check the negatives – be sure they are correct or mark them for future disputes. The negatives can be identified as:
  
  • Current was 30, 60, or 90 days late
    
  • Delinquent 30, 60 or 90 days late
    
  • Paid 30, 60 or 90 days late
    
  • Charge Off
    
  • Bankruptcy
    
  • Collection Account
    
  • Collection Paid
    
  • Judgment
    

Getting familiar with your report is a great first step in your recovery after settling your debt. Now you perceive the challenge!

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