How To Read A Credit Report

How to Read a Credit Report

Have you ever wondered what actually drove your credit score? If so, you are among the millions of people who are confused about how to understand both their credit score and their credit report. There are five components of your credit history that determine what your personal credit score is.

Credit Report Categories

When you view your credit report, you will notice that it is divided into categories, beginning with your personal information. Your personal information includes all names used, present address and previous addresses. The remainder of your personal credit report is divided into 5 components, including:

·         Types of Credit- 10%

·         New Credit- 10%

·         Length of Credit History- 15%

·         Amounts Owed- 30%

·         Account History- 35%

Types of Credit- The kind of credit that you utilize comprise this portion of our credit report. Examples of types of credit are instalment loans, credit cards, lines of credit, mortgage loans and home equity loans and consumer loans.

New Credit- 10% of your credit report is derived from the number of recent accounts that you have opened, the proportion of new accounts to your total accounts, and the quantity of new credit inquiries.

Length of Credit History- The length of time that you have established credit history will work to improve your credit score. Also, the length of time that each account has been opened will impact your credit score. So, when possible, work to keep accounts open as long as possible and select accounts that you can repay and maintain rather than short term accounts that will see little use.

Amounts Owed- The total amount you owe on all accounts, the total amount owed on each account, the total percentage of credit available that is used and the total percentage of credit accounts that are used will impact this portion of your credit report.

Account History- Each account that is present on your credit report will impact this portion of your credit report. Your payment history for each debt, past due amounts, late payments and current payment status will be reported, affecting your overall credit score. Any public records or negative credit information impacts this portion of your credit report.

Each of these categories impacts your overall credit score. And, while there is a total impact percentage for each category, each category is important in generating the best possible credit score for yourself.