How to read a credit report and why you should check it

Think of your credit report as a financial report card. It contains tons of personal information and important financial details, such as the amount of debt you have and your payment history. 

Your credit report is used to determine your credit score, which is like your current grade in a class. Lenders will look at your credit report and score to decide if they should approve you for loans or credit cards. Landlords might even check your credit before renting you an apartment.

Let’s look at how to get a copy of your credit report, how to read a credit report, and why it’s important to check it.

How to get a credit report

There’s not one end-all-be-all credit report. You actually have three credit reports — one from each of the three major credit bureaus. These credit reporting agencies are Experian, Equifax, and TransUnion.

One way to get a copy of your credit reports is to use AnnualCreditReport.com. Thanks to the Fair Credit Reporting Act, you’re entitled to a free copy of your credit report from each credit bureau every 12 months. 

However, as part of their response to the COVID-19 pandemic, the three credit bureaus started offering free weekly credit reports. This will continue until December 31, 2023. 

How to read a credit report

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A credit report is made up of five main sections: personal information, employer history, credit history, public records, and credit inquiries. To explain how to read a credit report, we’ll go through each section and the type of information you’ll find there.

Personal information

You’ll encounter a section with your personal information on your credit report. This will include items like your current name and any past names you’ve used, current and previous addresses, current and past phone numbers, your Social Security number, and date of birth.

Employer history

Each credit bureau’s report is a little different, but you may see a section with a list of your current and past employers and possibly your job titles. Some reports may go many years back, while others may only look back a few years.

Credit history

Your credit history is the main course on your credit report. This is where lenders can get a good sense of your creditworthiness. 

In the credit history section of your credit report, you’ll see a list of all your open accounts and even closed accounts from up to 10 years ago. The exact amount of time a closed account remains on your credit report varies, but 10 years is the longest. You’ll also see a breakdown of your account information, which we will cover next.

This area will include various types of debt, including installment loans (such as mortgages or car loans) and revolving credit accounts (like credit cards or lines of credit).

Let’s look at the details you can expect to see for each account on your credit report.

1. Current account balances

You’ll be able to see the current balances for each of your accounts. This is how much remains to be paid on the account. You will also see the highest-ever balance.

2. Original balances

For installment debts, you will see your original balance. This is the original amount the loan was for. For example, if you took out a $10,000 auto loan, but paid it off, this $10,000 original loan amount would show. Some credit reports may also list this as a “high balance.”

3. Payment status and history

Here, you’ll see if creditors report your payments as “on time” or late. They can only report a late payment when you are 30 days past the due date and haven’t made at least the minimum monthly payment.

If you continue not to make your payment, the creditor can mark you 60, 90, 120, or 150 days past due.

4. Credit limits

Credit limits apply only to revolving debts like credit cards and lines of credit. This is the maximum amount you can charge to the account.

5. Account opening and closing dates

Another detail that you’ll see for each account on your credit report is the account opening and closing dates. This information shows how old your accounts are and if you’ve opened a lot of new credit accounts recently. 

6. Account terms or monthly payment

Within your accounts, you’ll also see account terms or monthly payments. This is the current minimum monthly payment on the account. In an installment debt with a fixed payment term, you’ll also see the number of months the loan was for.

7. Account status

Account status is the final variable in your credit history. This lets you know whether the account is open, closed, paid in full, refinanced, transferred, defaulted, charged off, late, and more.

Public records

Another section on your credit report contains public records. This is where you’ll find any negative information, such as repossessions, foreclosures, bankruptcies, and judgments. Negative items typically remain on your credit report for seven years, but they can remain up to 10 years or as long as state laws permit.

Credit inquiries

You’ll also find your credit inquiries or credit checks. This lists all the creditors and other organizations that have performed a hard or soft credit inquiry on you. 

A hard inquiry is when the company reviews your credit history as part of an application you’ve submitted for credit, such as a credit card or loan. Hard credit checks remain on your credit report for up to two years but only impact your credit score for one year.

Soft inquiries happen when creditors verify your information without a request from you, such as to send you a pre-qualified credit card offer. You may also see a soft inquiry when you check your own credit or if you use a credit monitoring service. These types of inquiries don’t affect your credit score.

Why should you check your credit reports?

Checking your credit report is an important part of your financial maintenance. Your credit report and credit score play a role in getting approved for loans, credit cards, mortgages, and even apartments. So you want to check your report and look for opportunities to improve your credit score, like lowering your credit card balances and paying your bills on time. 

Even when you know you’re in great financial shape and manage your debt like a pro, you still want to periodically check your credit report. This is because mistakes happen. If human error results in an inaccurately reported late payment, it can have a negative impact on your credit. 

You also need to be on the lookout for identity theft. If someone gets their hands on your personal information and takes out debt in your name, it could damage your credit report.

Because of the potential for inaccurate information and identity theft, you want to scan your credit report for accounts, balances, and credit inquiries you don’t recognize and dispute them.

Build a good financial foundation with Greenlight

Maintaining a good credit report and good credit score can help you build a solid financial foundation. They may open the doors to financial opportunities — from a car loan to a mortgage on your first home. 

Whether you want to improve your credit score or you don’t have a credit history yet, you can practice good money habits and build your financial literacy. Greenlight can help. Its easy-to-use debit card offers up to 1% Cash Back to Savings.* Plus, the app’s Level Up game teaches you the money skills you need.

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*Greenlight + Invest families can earn monthly rewards of 1% per annum, Greenlight Core and Greenlight Select families can earn 2% per annum, Greenlight Max families can earn 3% per annum, and Greenlight Infinity families can earn 5% per annum on an average daily savings balance of up to $5,000 per family. Only Greenlight Max and Infinity families can earn 1% cash back on spending monthly. To qualify, the Primary Account must be in Good Standing and have a verified ACH funding account. See Greenlight Terms of Service for details. Subject to change at any time.