What to look for on your credit reports

Contrary to the beliefs of some, credit reporting agencies are not out to get you. They exist to gather facts and present them in an organized fashion. They collect information reported to them by the government, banks, mortgage companies, department stores, and other creditors and compile it into a credit report. They do not make lending decisions; their job is simply to provide the information that creditors need to make lending decisions.

There are three main credit reporting agencies: Equifax, Experian, and TransUnion. The three major credit bureaus are separate entities. It is important to know this because the information in their reports may vary slightly. Different creditors use different reports (or a combination of them) to determine whether or not you are creditworthy. Your credit reports contain a wealth of information, including your last three known addresses, your current and previous employers, a list of businesses that have inquired about information within your credit file, and a list of your credit accounts–both open and closed within the last seven years.

Since your credit file is constantly being updated with new information, it pays to understand exactly what is included in your file and to monitor the accuracy of what is being reported about you. A good rule of thumb is to review your reports at least once a year. To obtain one free copy of each of your credit reports every year, visit AnnualCreditReport.com. Once you have your reports, review them for accuracy, paying particular attention to the following.

Personal information. Make sure the names and addresses listed on your reports are accurate and up-to-date. In some cases, an incorrect address or suffix, such as Jr. or Sr., can result in someone else’s information appearing on your reports. Also, if your address has been unexpectedly changed on your reports, it may indicate that someone is fraudulently opening accounts in your name and rerouting the new cards.

Account information. Review the information about all open and closed credit accounts. Make sure that all balances and dates are accurate. Remember to report any unfamiliar account activity, as someone else could be using your account.

Inquiries. Inquiries result from new credit applications or when you authorize an employer or insurance company to check your credit history. Attempting to open too many credit accounts in a short period of time may have an adverse affect on your credit score. The inquiries you see on your credit bureau file where you did not apply for credit are from creditors who are considering offering you a solicitation for credit. While you have a right to see these inquiries, they are not seen by potential lenders and do not impact your creditworthiness.

Credit score. For a fee, you can also obtain your credit score. By comparing your information to the patterns in hundreds of thousands of past credit reports, a credit score identifies your level of future credit risk. A significant, unexpected drop in your credit score could indicate a problem and should be investigated.

Fortunately, if there are genuine mistakes or outdated items in your report, you can fix them yourself. Notify the credit bureaus of the problem and provide as much information about the error as possible. The bureau must, at not cost to you, investigate the disputed information. The bureau then will correct any mistakes or delete information that cannot be verified. For more on disputing credit reporting errors (because this is really just the tip of the iceberg), read How To Dispute Credit Reporting Errors and Fix Your Credit Report

Kim McGrigg is the former Manager of Community and Media Relations for MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.