How to Read and Understand Your Credit Report

You've probably read the myriad articles on the Internet and in personal finance magazines about the importance of checking your credit report on a regular basis-heck, there are even advertisements on television about this subject! What you might not know, however, is how to read and understand your credit report, which can make all the difference.

To most people, a credit report is a sheet of paper with various meaningless numbers and plenty of data that doesn't make sense. Buried within all that finance talk, however, is some extremely important information. You have to realize that your credit score isn't nearly as important as the contents of your credit report, which creditors will see when you apply for loans.

Sections of Your Credit Report

There are five major sections of your credit report as illustrated by Equifax, TransUnion and Experian. The first is your personal information, which includes your name, address, phone number, social security number and other pertinent information that creditors use to pull your file. This section is highly confidential, and is how identity theft often takes place.

The second section is matters of public record, which might include previous addresses, education, work history and other facts that creditors can use to verify your identity. None of this information is confidential, and can all be obtained at City Hall or on the Internet (for a fee).

The third section is the collection agency account information, which you don't need to worry about. The fourth and fifth sections of your credit report, however, are the most difficult to read and understand: credit account information and credit inquiries.

Credit Account Information

The fourth section on your credit report is difficult to read and understand because credit bureaus use alphanumeric does to indicate the status and type of account. This allows for fast reading if you are a creditor or bureau employee, but can be difficult for us regular consumers to decipher.