Credit reports contain critical information for our lives and careers, yet most Americans don’t fully understand them. The following guide will help you make sense of your report, gaining the knowledge for financial success.
Credit Report Rundown
Credit reports contain the following sections:
- Personal Data– This includes your name, date of birth, social security number, past and present addresses and employment records.
- Creditor Data– This describes all your credit accounts, specifying the balance, the last payment, limits and other key information.
- Adverse Items– If you are late on any payments, you have an outstanding balance or your creditors use a collections agency, this section will record it for seven years.
- Items In Good Standing– This will list accounts you have paid on time.
- Inquiries– This section lists individuals and organizations that have reviewed your report, including yourself.
As an American citizen, you are entitled to a credit report for free once per year, as well as any time you are subject to adverse actions. Reviewing your report regularly allows you to take charge of your credit and ensure a sound financial future.
Credit Report Meanings & Metrics
To fully benefit from your credit report, you must understand key terms and measurements, such as:
- Your Credit Score– This metric is based on your history of taking out credit and making payments, the sums you owe, the types of credit you have and any new lines of credit you have opened.
- Charge Off– This denotes that a creditor has stopped trying to collect payments from you.
- Open Accounts– For these lines of credit, you have to pay the full balance every month.
- Revolving Accounts– These lines of credit do not have to be paid fully each month.
- Installment Accounts– These loans require specific, regular payments over a pre-set time period.
- Collection Accounts– These are any accounts that a collection agency is involved with.
Understanding your credit report is crucial to starting a business, buying a home or taking out a major loan. For more information on financial metrics, contact Clark & Washington today.