How to Read and Understand Your Credit Report

Your credit report is a detailed record of your credit history. It's compiled by the three major credit bureaus, Equifax, Experian, and TransUnion, and it's the document lenders use to evaluate your creditworthiness.

Under federal law, you're entitled to one free credit report from each bureau every year. You can get yours at AnnualCreditReport.com, the only federally authorized source for free credit reports.

The Five Sections of Your Credit Report

1. Personal Information

This section includes your name, current and previous addresses, Social Security number, date of birth, and employment history. Review this carefully. Even small errors in your personal information can lead to mixed files, where someone else's credit history gets merged with yours.

2. Account History

This is the largest section. It lists every credit account you've opened, including:

• Creditor name — the bank or lender
• Account type — revolving, installment, mortgage
• Account number — partially masked for security
• Open date — when the account was opened
• Credit limit or loan amount
• Current balance
• Payment status — current, 30/60/90 days late, charged off
• Payment history — month-by-month record of on-time or late payments

Check each account carefully. Verify that you actually opened every account listed, that the balances are roughly correct, and that the payment history is accurate.

3. Public Records

This section includes bankruptcies, tax liens, and civil judgments. Bankruptcies can stay on your report for 7 to 10 years. Paid tax liens and civil judgments may be removed, but you may need to dispute them if they're still showing.

4. Inquiries

Inquiries are divided into two types:

• Hard inquiries — result from applying for credit. These can affect your score and remain on your report for two years.
• Soft inquiries — result from pre-approval offers, account reviews by existing creditors, or checking your own credit. These do not affect your score.

Review inquiries for any applications you don't recognize. Unfamiliar hard inquiries can be a sign of identity theft.

5. Consumer Statements

If you've disputed an item and the investigation didn't resolve it in your favor, you can add a brief statement to your report explaining your side of the story. Lenders can see this statement when reviewing your report.

How to Spot Errors

Studies show that approximately one in five credit reports contains an error significant enough to affect a person's credit score. Common errors include:

• Accounts that don't belong to you (possible identity theft)
• Incorrect late-payment notations
• Outdated negative items that should have been removed
• Duplicate accounts
• Incorrect balances or credit limits

What to Do If You Find an Error

If you spot an error, you have the right to dispute it with both the credit bureau and the creditor that reported the information. The bureau must investigate within 30 days and correct or remove any information it cannot verify.

Check out our guide on disputing credit report errors for a step-by-step walkthrough.