February 27, 2024

Companies collect information about your credit reports loans and how you pay them, then compile it into a single report that lenders, insurance agents and employers can review. These reports are your financial “report card” and can have a significant impact on your life, so it’s important to understand what’s in them. Diligent monitoring can also help ensure that your report is accurate, which may spare you unpleasant surprises when applying for a credit card, loan or mortgage.

There are three major credit bureaus, Experian, Equifax and TransUnion. They each maintain files on millions of consumers and sell the information they contain to businesses that make credit decisions, such as banks and lenders. The Fair Credit Reporting Act requires these agencies to follow certain rules when assembling and disseminating this information, but inaccuracies are common. Many of these errors can be disputed, and the bureaus are required to investigate and resolve them.

The first section of a credit report is a listing of personal information, including your name, address, birth date and Social Security number. This is the information that lenders use to match your credit report with your credit application.

Next is a list of current and past credit accounts, such as bankcards, loans and mortgages. The credit account numbers, types and status are listed as well as the balances and payment histories. Inaccuracies in the credit accounts section can have a big impact on your credit score. You should review this section carefully, focusing on accounts that you’ve recently opened or closed and paying particular attention to accounts in delinquency, which could be a sign of identity theft.

You’ll also find a record of inquiries made by businesses to your credit file. These are categorized as either soft or hard inquiries. A soft inquiry may be from a business that wants to send you promotional materials or it could be one of your current creditors checking your credit. A hard inquiry is one that you specifically authorize, such as when you apply for a new credit card or loan.

Finally, the credit report includes public records, such as court judgments and bankruptcies. These typically stay on the report for 7 to 10 years. Mistakes in this section can be difficult to correct, and it’s important to scan this part of the report for accuracy.

When you spot errors on your credit report, notify the bureau immediately. The law requires the credit bureau to reinvestigate the dispute and get back to you within 30 days. If you can provide documentation of the mistake, you can often get it removed from your report. Inaccurate information on your credit report can seriously harm your chances of getting a good deal on a loan or credit card. That’s why it’s worth taking the time to learn how to read your report and take the necessary steps to correct it when needed. Allan Halcrow is a freelance writer specializing in business, human resources and diversity and inclusion.

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