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Anatomy of a Credit Report: What You Should Know

Feb 24 2014 - 3:05am

Credit reports can be confusing at first look. DailyWorth [1] shares what you need to know the next time you're looking one over.

When you're trying to build your credit — or just being vigilant about avoiding identity theft [2] — it's important to check your credit report regularly. Each of the three nationwide credit reporting agencies (Experian [3], Equifax [4], and TransUnion [5]) will provide you with a free credit report [6] once every 12 months, upon request. But when you receive that credit report, it isn't always easy to know what to look for or what to do if you believe the report contains incorrect information. Let's break it down.

RELATED: Seven Credit Score Myths Debunked [7]

Credit Report, Credit Score — What's the Difference?
While the credit score may be the most talked-about item on your credit report, the credit report is bigger than just a numerical rating. (And it's important to note: your score is not included in the free report. However, you can order it through the same website [8], which is the only one authorized by federal law, for a fee.)


The credit report itself is "a detailed listing of all your debts and payments, going back through your entire payment history," says Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network [9]. "For each credit account you have, the report shows creditors' names, the amount owed, the highest balance owed, available credit, whether the account is open or closed (and who closed it), the number of times a payment was past due, and whether the account is in default."

The five sections of your credit report include:

What’s Included in My Credit Score?
In most cases, the credit score you order (again, for a fee) will be your FICO score, named for the company that developed it in 1989. Each of the credit bureaus may include different information in their calculations, so your FICO score can vary depending on which credit bureau provides the score. While the exact formula used to determine a FICO score is protected, FICO discloses some of the basic categories that affect a person’s score. For instance:

The percentages attached to each category can help consumers determine which areas are most important to their score. According to Jeff Taylor, managing partner of Digital Risk, Inc. [10], the most important items in your report are delinquencies and charge-offs, your percentage of revolving credit that is open (e.g., how much debt you owe vs. how much credit you have available), and recent credit inquiries. "Delinquencies, especially with the last 12 months, are devastating," Taylor says. "After that, the percent of revolving credit, then inquiries."

What Should I Do If Something Is Wrong on My Credit Report?

If you think you see an error on your report, call the consumer credit bureau that provided the report and state your case. "If there is a material error, the bureau is required to post a fix within 30 days, or the line of credit has to be suppressed until the error is made right," Taylor says.

And of course, if your score is not where you want it to be, make sure to get and stay current on your bills, and make a plan to pay off that revolving debt. (Here's a good place to start [11].)

— Nancy Mann Jackson

Check out these smart tips from DailyWorth:

Six Ways to Improve Your Credit Score Now [12]
How to Strategically Manage Your Debt [13]
Ask an Adviser: Which Debt Should I Pay Off First? [14]
Are You Getting the Most Bank For Your Buck? [15]

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