Are credit reports giving you a headache? Well, on this week's Podcast, I'm gonna break down how to read, understand and master them with confidence!
In the 20 years since releasing my first credit repair software, I've helped thousands of businesses build from the ground up. During that time, I experienced the very same challenges that Credit Heroes face, and I've learned proven ways to overcome them and succeed.
Like most of our Credit Heroes, the first problem I faced was the most difficult because my whole financial future was at stake.
A bank error didn't just hurt my credit score. It destroyed my life. I learned the hard way that if you don't monitor your credit and review your credit reports regularly, you can miss errors and other suspicious activity.
Back then, there wasn't a community of Credit Heroes to answer my questions or credit repair software to speed up the process. So I had to fix the problem myself.
I learned what many of you know, that the credit system is corrupt, the dispute process is slow, and credit reports are designed to confuse you.
Eventually, I was able to fix my credit issues and rebuild my life. But I learned a huge lesson. It doesn't matter who you are or your relationship to credit. Learning how to read and understand credit reports is a skill that can change your life.
HOW THIS RELATES TO US
For those of you new to credit repair, Credit scores get all the attention, but credit reports do all the work. They contain everything from your personal information and account history to collections and public records.
In other words, credit reports tell your financial story. Unfortunately, they don't always tell the truth. A staggering 79% of credit reports have errors, and those errors can destroy your life, just like they did to me.
So, who's behind these reports? They're built and maintained by reporting agencies like Equifax, Experian, and TransUnion, the three main credit bureaus. But don't let their official-sounding title of "bureau" fool you. These are not government organizations. They're for-profit companies.
So, if you want to be able to fight back against this system, dispute those errors and win, your credit reports hold the keys.
THE THING TO REMEMBER
The CFPB recommends you check your credit reports at least once a year, but credit profiles are updated at least once a month, so if you're serious about repairing your credit, or running a credit repair business, checking reports regularly is essential for success.
You can request copies of your credit reports as often as you want without hurting your credit because when you pull your own report, it's considered a "soft inquiry."
If you don't already have copies of your credit reports or know how to request copies of your reports, you're entitled to one FREE report from each of the three major credit Bureaus every 12 months.
In fact, due to all the financial hardship resulting from the pandemic, you can actually get a free credit report each week through the rest of 2023.
All you have to do is go to AnnualCreditReport.com, fill out the short request form, choose which report you want to start with, then repeat the process for all three Bureaus.
The only catch is these free credit reports do not include credit scores.
Federal law gives you the right to a copy of your credit report, but credit scores are calculated by the Bureaus when they plug your information into their formulas. It's why you have three unique credit scores.
So, if you want your Credit Reports and Credit Scores from all three bureaus, you can instantly get all of that for $1 when you sign up for a 7-day trial of Credit Hero Score at CreditHeroScore.com.
WHY THIS IS IMPORTANT
If you want to learn how to read credit reports like the back of your hand and dispute errors faster, then open up or print out a copy of your report right now because I'm going to walk you through a full three Bureau report!
Trust me on this: the fastest way to learn something is through experience, especially when the results impact you directly.
Sure, software tools are making it faster and easier to read credit reports, but if you don't understand the fundamentals of a credit report, you won't really know what you're doing. Any progress you make might just be temporary.
This is doubly true if you're running a credit repair business. Whether a report lands in your inbox or gets handed to you in person, you need to be able to read it on the fly, understand it, and provide actionable feedback. If you can't, then you aren't taking your craft seriously enough.
The good news is by the time we're done; you'll have a better understanding of how to read credit reports. And it's much easier than you think!
If you need a second to pull up your credit report, hit pause, take a breath, and get ready to take notes!
WHAT YOU NEED TO KNOW
Credit reports can look different depending on the company producing them, so I will cover all the standard sections, line items, and moving parts. That way, you can read any report with complete confidence, no matter its source.
Now, there are two primary types of reports: single-bureau and 3-bureau. If your report is divided into three sections, with the scores on top and each of the three bureaus listed side-by-side, that's a three-bureau report.
That's the kind we have at Credit Hero Score.
Three bureau reports are the easiest to read, and they're the best for credit repair businesses. Their layout lets you quickly compare information and spot discrepancies, giving them an edge over single-bureau reports.
But don't worry, if you're only working with a single-bureau report, everything I say still applies. It may just take you longer to cross-check all the details.
Now, if your report uses slightly different wording or it's arranged in a slightly different way, that's fine. All reports have the same basic structure: Credit Score, Personal Information, Risk Factors, Account Summary, Account History, Inquiries, Collections, Public Records, Creditor Contacts, and Consumer Statements.
A quick reminder, if you're reading a free credit report, it won't have a Credit Score section, but most new reports will.
Alright, let's dive in!
SECTION #1: Credit Scores
The credit score section is pretty self-explanatory. Each bureau score is listed along with the range it falls under, like "POOR," "FAIR," or "GOOD."
Some reports, like the ones from Credit Hero Score, include score updates, points gained or lost, and graphs that track change over time.
The only error you might find in this section is if one of the scores is missing. This usually means you don't have enough qualifying credit to generate a score, and you can fix that by contacting the bureau or building more credit.
SECTION #2: Personal Information
In the personal information section, you'll find names, alias, date of birth, social security numbers, addresses, and employment information.
The first step of ANY credit dispute process is to go after low-hanging fruit, and the personal information section is notorious for errors. Those errors are often tied to negative information on your credit report. You may see a lot of crazy stuff in here. Because every time you apply for credit, the person typing all your information, whatever they type, goes directly into here, and they make a lot of mistakes.
So if you find any misspelled names, incorrect dates, birthdays, social security numbers, or addresses, you should dispute them.
Also, if you see names or addresses that you don't recognize, that can be a sign of identity theft, so dispute them immediately.
SECTION #3: Risk Factors
Now, depending on the source of the report, the next section is a breakdown of risk factors and red flags found in your report.
Not all reports include this section, but if you ever get turned down for credit, the risk factor section usually holds some clues as to why.
The risk factors are usually listed in order of importance. They can be extremely serious and detrimental to your credit, like "Too Many Unpaid Accounts in Collections," or they can be simple things that are easy to fix, like "Lack of Credit History.
SECTION #4: Account Summary
The account summary section is a snapshot of everything inside the report. It includes the total number of open and closed accounts, delinquent accounts, collections, and derogatory items. It also lists the combined balance, monthly payments, public records, and inquiries.
This section serves as a quick reference point, making it easier to cross-check and confirm that all three bureaus report the same information. If they're not, that's when you know you need to dive into the more detailed sections below.
SECTION #5: Account History
The account history usually comes next, and it's by far the largest portion of your credit report. This section details everything about your lines of credit, both open and closed accounts.
With each account, you'll see the following:
The Type of Account (whether it's a Credit Card, Student Loan, etc.)
The Account Name and Number
The Account Standing
The Account Balance and Credit Limit
The Account Status (whether it's opened or closed)
The Date the Account was opened
The Date of Last Activity
Who's Responsible for the Account (whether it's an individual or joint)
Any Remarks, Statements, or Comments attached to the Account
The Number of Late Payments (if any)
The High Balance (the total amount borrowed)
The Monthly Payment Amount
The Current Payment Status
The Amount Past Due
The Name and Address of the Creditor on the Account
And a Calendar of the Account Payment History, a month-by-month, year-by-year list showing whether the account was Paid On time, Past Due, In Collections, Charged-off, in Bankruptcy, etc.
I know that was a lot to take in, but each line of these accounts needs to be verified as accurate. If you find a discrepancy at any point, you should investigate it further.
For example, if Experian tags a credit card account as CLOSED while Equifax says it's OPEN, something's off. One of them is providing incorrect information, and it can be disputed.
Similarly, if the DATE OPENED or the DATE OF LAST PAYMENT doesn't match between each bureau. One of them is providing incorrect information, and it can be disputed.
However, you can't just point out that the bureaus are providing inconsistent information and hope that will be enough to win a dispute. You have to emphasize that the specific item they are showing is incorrect.
The account history section is massive, so be on the lookout for duplicate accounts and especially Accounts you don't remember opening.
Make sure no duplicates exist, but if they do, review the impact they're having on your report and dispute them if necessary.
If you notice any accounts you don't remember opening, contact the creditor immediately for more information. It could be a sign of identity theft.
There's a lot more to say about this section and a ton of dispute strategies that go along with it. But for now, you've got a solid foundation to start with.
SECTION #6: Inquiries
Every time you apply for credit and some company is pulling your credit, that is called an inquiry. The inquiries section is a record of every time your credit report has been requested and accessed. It includes details like the creditor's name, the type of business, the Date of the inquiry, and which bureau it came from.
Here you want to look for unauthorized inquiries that you don't recognize, soft inquiries that are incorrectly reported as hard inquiries, or duplicate inquiries. These all represent incorrect information, and it can be disputed.
SECTION #7: Collections
The collection accounts section lists any debts that have gone unpaid and been sent to collections.
In it, you'll find the name of the creditor who is collecting the debt, the amount of the debt, the date the debt was first reported to collections, the date the debt was last updated, the status of the debt (whether it's open, closed, settled) and any remarks related to the collection.
Similar to the Account History section, each line of these collections needs to be verified as accurate. If there's a discrepancy at any point, you should investigate it further.
SECTION #8: Public Records
Due to recent changes in the laws, the only public records that are allowed to appear on a credit report are bankruptcy documents.
If you notice any public records besides bankruptcy documents, like tax liens, contact the bureaus immediately and dispute that.
When it comes to bankruptcies themselves, review the details for discrepancies, but also pay attention to the filing dates.
If there's a Chapter 13 bankruptcy that's over 7 years from the filing date or a Chapter 7 bankruptcy that's over 10 years from the filing date, they should've fallen off the report by now, and you can dispute that and get it removed.
SECTION #9: Creditor Contacts
The creditor contacts (or the Furnisher Contacts) section is also pretty straightforward. It lists the contact information of any creditor that provided information about you to the bureaus.
There's not much to dispute in this section, but if you see a creditor you don't remember doing business with, investigate the issue.
SECTION #10: Consumer Statements
Not all reports have the consumer statements section, but for those that do, it contains any statements you've given to the bureaus to clarify something about your credit.
For example, if you dispute an item but it's not resolved or removed from your report, you might file a brief statement explaining why you disagree with the piece of information in the report.
However, it's important to know that adding comments here can often backfire. Rather than helping, they can draw even more attention to a negative item you're trying to remove. So I recommend not having any consumer statements because they do not help you. And if you have any, ask the bureau to remove them.
The better you get at reading and understanding credit reports, the less you'll have to worry about making comments about unresolved disputes.
If you have any credit report questions, you can drop them in the comments.
And if you want 6 months of Credit Repair Cloud software for FREE, plus access to our advanced disputing and business courses, sign up for our Masterclass!
MY FINAL POINT
Your credit report tells your financial story. Take control of it. Learn how to read it. The better you understand it, the healthier you'll be. You're not just learning how to improve your credit. You're developing a lifelong skill – one you can use to build a business and change lives.
I'LL END BY SAYING
If you still need a Credit Repair Cloud account, check it out. It's the software that most Credit Repair businesses in America run on. Sign up here for a Free Trial!
And if you'd like to change lives and grow your Credit Repair business, check out our Credit Hero Challenge!
It's an amazing program, and we've got another challenge starting in a few days, so grab your spot right now at CreditHeroChallenge.com!
So take care, Credit Hero!
And Keep Changing Lives!