Reading credit reports can be very confusing. “R” refers to a revolving account, “I” refers to an individual account, and “M” refers to a maker on the account. “Y” refers to a collection account. This rating is supplied by the creditor. It is their rating of you as a borrower. There are only two ratings which are not negative. A rating of “1” means that the account is current and a rating of “0” means that they don’t have enough history with you to rate you.
- Too new to rate
- Current account
- 30 days late
- 60 days late
- 90 days late
- 120 + days late
- 150 + days late
- Included in a re-payment plan such as chapter 13 bankruptcy
- REPOSSESSION / FORECLOSURE
- CHARGE-OFF / COLLECTION
Every other rating, “2” through “9” is negative. The creditor usually looks at the late pays or other notations such as “charge off” or “collections.” However, any rating but a “1” or “0” indicates that you have problems with the account.
Anatomy of a credit report
A credit report is basically divided into four sections: identifying information, credit history, public records, and inquiries.
Identifying information is just that — information to identify you. Look at it closely to make sure it’s accurate. It’s not unusual for there to be two or three spellings of your name or more than one Social Security number. That’s usually because someone reported the information that way. The variations will stay on your credit report.
Other information might include your current and previous addresses, your date of birth, telephone numbers, driver’s license numbers, your employer and your spouse’s name.
The next section is your credit history. Sometimes, the individual accounts are called trade lines.
Each account will include the name of the creditor and the account number, which may be scrambled for security purposes. You may have more than one account from a creditor. Many creditors have more than one kind of account, or if you move, they transfer your account to a new location and assign a new number. The entry will also include:
- When you opened the account;
- The kind of credit (installment, such as a mortgage or car loan, or revolving, such as a department store credit card);
- Whether the account is in your name alone or with another person;
- Total amount of the loan, high credit limit or highest balance on the card;
- How much you still owe;
- Fixed monthly payments or minimum monthly amount;
- Status of the account (open, inactive, closed, paid, etc.);
- How well you’ve paid the account.
On Experian’s report, your payment history is written in plain English — never pays late, typically pays 30 days late, etc. Other comments might include internal collection and charged off or default.
Charged off means the creditor has given up efforts to collect and written it off.
It doesn’t list arrests and criminal activities; just financial-related data, such as bankruptcies, judgments and tax liens. Those are the monsters that will trash your credit faster than anything else.
The final section is the inquiries. That’s a list of everyone who asked to see your credit report.
Inquiries are divided into two sections. “Hard” inquiries are ones you initiate by filling out a credit application or taking your child to the orthodontist. “Soft” inquiries are from companies that want to send out promotional information to a pre-qualified group or current creditors who are monitoring your account.
You may have heard that a large number of inquiries can have a negative impact on your credit score, but you’re probably OK.
For instance, the model has a buffer period that ignores inquiries within 30 days of getting a mortgage or a car loan. It also counts two or more “hard” inquiries in the same 14-day period as just one inquiry.
If you find a mistake on your credit report — an account that isn’t yours or a disputed amount — you’ll need to fill out the form that comes with the report, or follow the instructions on the explanatory sheet.
The process takes time because the creditors have 30 days to respond to a charge of a discrepancy. As long as a charge is in dispute, that dispute will show up on your report. Long-time lenders say it’s common for reports to have errors. Some estimate that as many as 80 percent of all credit reports have some kind of misinformation.
Visitors who read this page also viewed these pages:
- Consumer credit industry resources – Links to important consumer credit industry websites.
- Mortgage industry terminology – Decoding the sometimes confusing mortgage industry words and phrases.
- Credit Grades – What are credit grades and how do they affect your ability to get credit and good credit terms.