How to Interpret Credit Reports

It's a good idea to order your credit report at least once a year. This helps you manage your credit and find out if any errors have occurred. In order for you to completely understand your credit report you must be able to interpret the information. There are three major credit reporting agencies that provide the same information, but that information could be in a different format. All three credit reporting agencies may not have the same data on file for you.

Instructions

1

Order your free annual credit report from all three credit reporting agencies (See Resources below). This will give you a chance to see how each credit reporting agency reports your information. Review the information on your report to make sure everything is accurate. Take a look at your personal information such as name, address, Social Security number, date of birth and employment.

2

Review the trade lines on your credit report. A trade line is all of the information that a creditor will report to a credit reporting agency regarding your debt or credit account. Trade lines consist of the creditor's name, balance owed, high credit, credit limit, date last paid, credit rating, account type and responsibility.

3

Compare each item on all three reports. The balance owed should be the balance on your account when the creditor reported it to the agencies. Your high credit is the highest amount of credit that a creditor extended to you. Note that this can be different from your credit limit. For example, say you had a credit card with a credit limit of $6,000, you charged $6,000 of merchandise, and then you paid your balance down to $4,000. If the creditor lowers your credit limit to $4,000, someone can still look at the high credit amount and know that the highest amount of credit you were given was $6,000. They can only assume that your credit limit was lowered. The date last paid will usually be the month and year, such as 9/2009.

4

Review your credit rating. Some credit bureaus will show a credit rating such as R1 or I1. The "R" stands for revolving account, such as a credit card or a line of credit. The "1" is the best credit rating you can receive. This rating means you pay on time, as agreed, less than 30 days late. If you receive an R2 it means you pay 30 days late but less than 60 days past due. An R3 means your revolving account is past due more than 60 days late but less than 90 days past due. An R4 means your payment is greater than 90 days late but it has not exceeded 120 days past due yet. An R5 means your account is past due 120 days but it has not been charged off yet. When you see an R7 it means that you have made arrangements with a debt settlement company. They have negotiated repayment arrangements with your creditors. An R9 means a creditor has written your account off of their receivable listing and reported your account as a loss. This means your account is reported as a bad debt on the creditor's accounting statements. When an account reaches this stage, it is usually forwarded to a collection agency.

5

Become familiar with the different designations. One credit bureau may show your credit rating as an R1 and another may show it as, "AA," which means "paid as agreed." An R9, which is a charged off account, may show up on another credit report as, "charged off as bad debt," but they mean the same thing. If the account shows as an I9 instead of R9, the "I" stands for installment, which is a loan such as an automobile loan.

6

The bottom of your credit report will have the different inquiries. An inquiry means someone pulled or ordered your credit report. The name and address of all creditors ordering your credit report will show up as an inquiry.