Checking your credit report at least once a year – which can be done for free, despite the myth that it’ll lower your credit score – is one of the best personal finance habits you can adopt.
As we’ve outline in the past, staying on top of your credit report & credit score prevents identity theft and fraud, sets you up for better rates on loans, and ensures no incorrect information is impacting your credit score in a bad way.
As you shoot for that elusive, perfect 850 FICO credit score, it may help to understand what you’re reading on your credit report, so you know whether you’re on an upward or downward trajectory. Let’s review, step-by-step, how to read your credit report.
1. Check Personal Information
Let’s start with the basics. Your personal information must be correct, so be sure your name, social security number, phone number, and address all check out. The Big Three credit bureaus – Equifax, Experian, and TransUnion – are usually good at keeping track of all your names and SSNs that belong to you.
If you do find an error, like a misspelled name or incorrect street number, you can contact one of the bureaus with your supporting documentation. Personal information that’s way off which you don’t recognize at all could be a sign of identity theft, so be mindful of that too!
2. Keep an eye on account ownership errors
Say you’re Sidney Crosby Jr., and you register for a store credit card. A credit bureau may list the account on the bigger Sidney’s report – Sidney Senior – rather than yours. That’s called a mixed file. Or, the older Crosby could decide to open a store card in his name, then add you as an authorized user, or vice versa.
Make sure that reported accounts on your credit report are ones in which you’re the owner.
3. Accounts incorrectly reported as delinquent or late
You should only have a late or delinquent note on debt if you’re over 30 days past due – any other scenario should be reported immediately.
Remember, however, that very recent payments won’t be reflected instantly on your credit report. To be extra sure, you can follow up with the company owning your debt to verify they’ve notified credit bureaus.
We can’t stress this enough: ensuring your accounts are current is crucial! Payment history accounts for 35% of your FICO score!
4. Double-check key account dates
The #1 date to verify is when your account was opened; the length of your credit history impacts 15% of your credit score after all. Validate other important like date of last payment, and date of first delinquency, too.
5. Ensure no accounts are double listed
A rare but possible occurrence, accounts listed twice can pop up when you upgrade your credit card with the same company, or refinance a loan with the same institution.
Be diligent and watchful of companies that transfer ownership of a delinquent account to collection agencies. This can result in a double or triple roundhouse-kick to your credit score for a mistake you may’ve made once. You’ll still need to pay what you owe, but not by a factor of two or three.
6. Check credit limits & balances
Confirm that any account balances are in a range that makes sense with your spending, and that all credit card limits are up to date. This is another area that heavily impacts your FICO credit score – 30% is based on your credit utilization ratio (total credit card balances divided by total credit card limits)!
So the more credit you have, the lower your credit utilization ratio will be. Financial experts suggest that ratio should stay under the 30% threshold.
7. Look at public records
Bankruptcy, unpaid driving violations, and even library fines can all come back to bite you in the credit report. Depending on other factors, these public records can be reflected on your report for up to seven years!
You may forget about those moments of shame, but credit bureaus won’t – even after you’ve settled them, they may still arise on your report. Keep an eye out for outstanding public records, and deal with them ASAP.
8. Follow up on corrected information
If you do need to report an error to one of the credit bureaus, always follow up to guarantee any egregious information has been corrected. For error reporting, you can follow the instructions on your credit report, or file a dispute online with Equifax, Experian, or TransUnion.
Now that you know how to read your credit report, you’re ready to start improving that credit score!
If you’re looking to improve your credit score, but are having difficulty securing a loan, Magical Credit can help. Anyone with a steady income, including those from non-traditional sources, may be eligible for a cash loan between $2,000-$10,000.
For more information, call Magical Credit at 1-877-213-2088 or fill out our online application today!