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Breaking Down a Credit Report
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Jamara (She/Her)
Financial Educator
Posted September 9, 2021
Credit reports reflect our financial identities. A credit report breaks down how financially responsible you are. Think of your credit report like a fingerprint. They are specially linked to each of us. Your report grows and changes with you throughout the years, based on the financial decisions you make. The more you know about your credit, the more capable you are of knowing how to manage your credit. This is why it is important that everyone has an understanding of what makes up a credit report and that they know how to analyze their own.
Identity
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Personal identifying information directly links everyone to their own credit report. The first section of a credit report will list your name, any previous or alternate names (maiden, nicknames, or surnames), social security number, date of birth, addresses, and possible employer information. This section is important to review to ensure there isn’t any incorrect information. Incorrect personal information could be a red flag and a sign of possible fraudulent activity. It is vital that any incorrect information listed anywhere on your report be disputed when discovered. Catching and reporting inaccurate information sooner rather than later will save you from a lot of financial frustration down the road. You can dispute incorrect information directly with the credit bureaus or via AnnualCreditReport.com.
Trade lines and inquiries
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The heart of your credit report is your financial history. Trade lines list every credit account that you have handled within a seven to ten year timeframe. This includes closed, delinquent, or charged off accounts. Trade lines will also identify the lender from which you borrowed credit, the date that the account was opened and closed, as well as the beginning balance and current balance from the last time the account was reported to a credit bureau. Each trade line will display your credit history with that specific lender and how well you have paid back your responsibility. Your previous credit performances help to determine credit worthiness when you are applying for new credit.

When you apply for any type of credit account, there will be an inquiry placed on your report. An inquiry is a stamp on the report left by the lender who requested to view it. There are soft and hard inquiries. An example of a soft inquiry is when a consumer requests their own credit report. Soft inquiries can also be used by lenders as well, but this typically only provides them a snapshot and a credit score instead of a full, detailed report.

Hard inquiries provide a full credit report and are used when a lender is completing a credit application at the request of the consumer. Hard inquires can affect your credit score, so try to avoid having your credit pulled too many times within a year. Only apply for credit when necessary, and do your research on each lender you are considering before allowing a hard inquiry to be placed on your report.
Factors
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There are five different categories that factor into a credit score: payment history, amounts owed, length of credit, new credit, and credit types. We now know that payment history is a huge determining factor when applying for new credit. This is why it is the largest portion of the report that factors into your score at 35%. The length of your credit history is also factor. Though it is only 15% of what makes up your score, it shows an average of how long you have managed individual credit accounts. This displays your ability to repay and the length at which you can responsibly hold a good relationship with a lender. It is imperative to take care of your financial responsibilities as together, your payment history, and length of history contributes to 50% of your score.

Amounts owed compares your open availability to the balances borrowed on revolving accounts, such as credit cards. The amounts borrowed compared to your availability factors into your score at 30%. Having a variety of credit accounts, including installment and revolving loans, also calculates into your credit score. This is called having a credit mix. Credit mix makes up a small portion of the score at 10%. Another small, but essential, factor is new credit. New credit is factored in at 10% when new accounts are added to your report and via hard inquiries, as mentioned above.
Know your report
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It is essential that you understand how a credit report generates. Know what your credit report says about you. As a consumer you are entitled to review your report for free every year at AnnualCreditReport.com. Being in the know helps you to shape and reshape your financial identity when necessary. Knowing how to read a credit report will also help you to know where improvements need to be made. Staying aware of your financial identity will also assist when applying for new credit. This allows you to have confident and healthy conversations with your lender about all the items on your report, whether positive or negative. Stay connected to your financial identity by learning how to break your credit down. Feel confident in knowing where you stand.
Sources:
https://www.investopedia.com/terms/c/creditreport.asp
AnnualCreditReport.com
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