Understanding Your Credit Report

Do you understand what is on your credit report? If your answer is “No,” do not worry. You are definitely not alone! Most people cannot read a credit report, much less understand what they are trying to convey. Credit reports, very much like credit card statements are getting easier to read however Congress has passed laws over the years to help consumers understand what they are looking at.

In addition, in just the past three years, laws have been past whereby ever consumer is now allowed to have one copy of their credit report every year for free. In order to obtain that, all you need to do is simply go to this web site: www.annualcreditreport.com, type in your information and you should be able to download each one of your credit reports. There are three credit bureaus that provide these reports.
They are 1.) Experian; 2.) Equifax and 3.) Experian. All three are available for you to download on this site.

This is an excellent opportunity for you to not only check your report for any discrepancies you may have on your reports, however it also helps in identifying whether or not your identity may be in jeopardy of being stolen. For those of us “in the business” of being able to decipher what a credit report is saying, we call it Credit Speak. It is not necessary for the average person to understand Credit Speak, however there are
a few basic things you should understand in order to ensure you are on the right track.

Credit Speak is a two-pronged approach to reading a credit report is challenging at first. At Nationwide Debt Reduction even the best of us can struggle with some of the terminology these companies use to describe items of importance on your credit report. For Example: When you look at a credit report, the first thing you notice is that the language itself really does not make any sense.

• What in the world does “I-9 mean?”
• What does “FDTXL” spell? (No, you cannot buy a vowel!)

So what does it all mean? Simply put, these are some examples of the building blocks of Credit Speak.
Just as the ABC’s are part of the English language. Once you master the basics, Credit Speak will
become a second language for you and really no task at all for you to understand. Once you are able to
read your credit report, you will need to understand what each entry means, as well as how it affects you.
Some of it is pretty straightforward at first. For example: An entry that says “Paid/Was 30″ means
you paid the account and you were 30 days late once.

Easy, right? Well, maybe not as easy as it looks. Because there are factors that make that entry more or less important. A 30 day late entry that is a month old is a much bigger problem than one that is three years old. And it will change your credit score more drastically as well. When you understand what kind of negative entries affect your score more than others it will be easier to decide which entries to attack first. And more importantly, how to attack them.

What Kind of Information Influences My Credit Score?

Your credit profile is composed of five basic components. When you understand what goes into a good credit score, you will be better able to control yours in a meaningful way. Understanding this information will help you make decisions.
• Should you close an account?
• Should you apply for more credit?
• Should you pay someone off?
• Or should you continue to make regular payments to demonstrate a good payment history?

The answers to these questions will probably not be the same for everyone. When you review your credit history, you will be able to determine which strategies will work best for your special situation.

The 5 basic elements of a credit profile are as follows:

1. Payment History. This accounts for about 35% of your score.
2. Amounts Owed. This accounts for about 30% of your score.
3. Length of Credit History. This accounts for about 15% of your score.
4. New Credit. This accounts for about 10% of your score.
5. Types of Credit used. This accounts for about 10% of your score.

Keep these ratios in mind. They are important. They will act as a guideline when you decide to take control of your credit history. They tell you what areas of your credit need more attention. And you may make adjustments according to your particular needs. Not according to what someone thinks you need.

Just as important as knowing what is in your credit profile is the understanding of what factors do not affect your score, or which may not affect your score as a matter of law.