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.
The first set of characters will be letters of the alphabet, and indicate the type of account that you opened. A "J", for example, indicates that it is a joint account, while an "I" will indicate an individual account. They also use "A" for authorized users, "S" for shared accounts, "T" for terminated accounts and "C" for co-signers.
Next to those letters, you might also see the status of the account indicated. "O" stands for an open account that is currently used by the account holder, while "R" stands for a revolving account.
Then you have the numerical codes used to indicate the payment status. Contrary to popular belief, your credit history doesn't say how much you owe on a particular loan or how much you have left before you hit your credit limit. Instead, numerical numbers indicate the basic status.
The only positive number your credit report can reflect is the number "1" for paid as agreed. The rest of the numbers (2-9) indicate the length of time that your account has been past-due (30 days, 60 days, 90 days, etc.).
To read and understand your credit report, however, you only need to know that the number on all accounts should be "1" unless you have fallen behind, and that the letters indicate the type of account.
Credit Inquiry Section
What most people don't understand about their credit report is that inquiries make a difference in how your history is received. Each time you apply for a loan, credit card or line of credit, a notation is made in your report. This isn't always a bad thing, but too many inquiries can damage your score.
In the credit inquiries section, requests for your credit file are given one of two indices: one represents the request for your credit score and nothing else, while the other represents and request for the full credit file. The alphanumerical indices are different depending on the individual credit bureau, so make sure to inquire if you aren't sure how to read and understand this section of your credit report.