International students might be shocked to hear that only 16% of Americans understand their credit reports. As we’ve said many times before, the power of financial education lies in how few people have it. The US runs a complex credit-based financial system that benefits those who educate themselves. Reading and understanding a credit report is a crucial part of this education and we’re here to help.
Let’s say you’ve requested your first credit report from one of the major credit bureaus—Equifax, Experian, TransUnion, or Innovis. Each of these bureaus uses different reporting schedules and may not include parts of your credit history such as recently closed accounts. Although we know the major factors that contribute to your credit score, there’s other factors that influence your score that are completely out of your control. We show you the 5 major ones below and how to fix them if necessary.
These are sometimes out of date depending on the information available at the time the credit report was compiled. If you see outdated info on one of your credit reports, simply inform your creditors of the change and they’ll send the info to credit bureaus themselves. But don’t worry: outdated personal info doesn’t negatively affect your report.
Information about your open lines of credit must be accurate to properly reflect you. Review the payment history, credit limit, and balances to make sure they are correctly represented on your report. You also want to make sure that all of the credit lines and accounts are ones that YOU opened or for which you were responsible. It’s possible someone with the same name as you opened an account that was mistakenly attributed to you. It also may be that someone stole your identity and sought credit under your name. If that happens, make sure to set up a fraud alert with the credit bureau displaying the suspected fraudulent account. It’s free of charge and creditors will know to reach out to you directly about any future attempts to open credit under your name.
If your debt was ever sent to collections, that account was likely passed around to multiple sources. In most cases this will be attributed to a single account but it’s possible that each assignment of the account will be listed separately. Confirm that the information is up to date on each of these collections accounts.
Each time you seek credit, a lender will make an inquiry into your credit report. Too many of these “hard inquiries” negatively affect your score, especially if you have a short credit history. When seeking credit, focus your search for loans and other cards inside the same 45-day window to minimize the impact on your score.
Although less common for most credit holders, financial matters of public record such as foreclosures and bankruptcies can have a dramatic negative influence on your credit report. However they will both be removed from your record after 7 years. If any of this information remains on your report after that time, you can dispute it with your credit bureau by submitting evidence of your claim.
Congratulations! Simply reading this article has made you better educated about credit than most adult Americans. Seek out your credit report, speak up about inaccuracies, and ensure a brighter financial future for yourself!