A credit report is usually divided into four sections: identification, credit history, public record, and inquiries.
• Identification. The identification section contains all the data that identifies you as a person, your name, address, Social Security number, birth date, etc. This section is the one where the majority of errors show up. You may find that your name is spelled several different ways, or your Social Security number is one digit off, or even your address is wrong.
If one of your creditors has reported the information wrong, like calling someone “Diane” instead of “Diana,” the credit bureau will let this type of error remain. Why? Because the creditor who reported the information may have it wrong in its records and, although in obvious error, this keeps the link between your credit report and this creditor. The fact that it is on your credit report shows that the information landed in the correct place.
You should be concerned about errors that are not just simple typos, such as addresses that you never had, variations on your name that link to creditors you never did business with, or anything that could indicate identify theft.
• Credit history. This section lists your creditors or, as they are sometimes called, individual accounts or trade lines. Each account will list the name of the creditor, account number, date you opened the account, type of credit, the name on the account, total amount outstanding, the highest credit limit allowed, the highest balance ever held, how much you still owe, history of monthly payments, and the status of the account (open, inactive, or closed). The history of payment may be indicated with a code usually from 1 to 9, with 1 indicating that all payments were made on time.
Look for the term charged off, which means that you owed this credit this amount, but the creditor gave up trying to collect the amount and wrote it off its books. This is deceiving because creditors rarely just write something off their books and let it drop. In most cases they write it off the books but turn the debt over to a collection agency.
• Public record. The public record section lists any court judgments, bankruptcies, liens, and other financial problems that have gotten into court. Lenders scrutinize any entries here.
This section can be a real surprise for people. You may find that the car you cosigned on with your ex-girlfriend was never paid for and the debt was charged against you. You may find that the department store charge that you refused to pay was turned over to a collection agency that got a court judgment against you.
According to the credit bureaus, this section, which can be of great importance to your mortgage lender, causes the most problems.
• Inquiries. The final section in a credit report is inquiries. This lists hard inquiries, or those that indicate you have applied for credit, and soft inquiries, which are made by those pushy creditors who send out the allegedly preapproved credit cards to everyone and their dog.