In our previous article, Your Credit Score Explained we talked about the basics of a credit score, as well as detailed information about the various elements that make up your score. Now, we want to share information related to understanding your actual credit history… which makes up the score that lenders look at when making loan decisions.
Credit Report vs Credit History vs Credit Score
Sometimes the difference between these three terms are commonly misunderstood, so let’s clarify. Your credit report is a record of your credit history and what a lender will order as part of a request for credit when you start the loan application process. Your credit history is the record of all of your payment and debt activity, such as when credit was issued, your payment history, outstanding balances, utilization percentages, any past-due payments made, etc. Finally, your credit score is the numerical value assigned to your credit history to give a lender a sense of what’s in your credit history and the likelihood you’ll repay the loan.
Monitor Your Credit
Considering the impact your credit score can have on your financial goals, such as buying a house, purchasing a car, or getting a credit card, it’s important to make sure you have your finger on the pulse of this number. Through credit monitoring, you’ll be alerted to any changes in your credit report that impact your overall credit score. This can either be done via a service that sends you updates anytime something on your credit report changes, or manually by reviewing your credit score each month to look for changes.
You can get a report of your credit history from all three of the different bureaus for free from AnnualCreditReport.com. While this service won’t provide you with your credit score, it will give you a good look at what is in your credit history, and it’s important to review this information on a regular basis.
What to Look Out for in Your Credit History
When reviewing your credit history and combing through information on your report, here are some things you should be looking for. First, make sure that any account on the report that shows as “open” is indeed an open account. Check to make sure that balance information, and any listings of past-due (commonly referred to as 30/60/90, in references of the days a payment is made after its due date) are correct.
Additionally, you’ll want to look for false or unrecognized information in your credit history, as that could indicate the start of identity theft, or at least will unfairly hurt your credit score. It’s important to catch any inconsistencies early.
Below are some elements of your credit history to pay special attention to, as they may raise red flags (and have a negative impact on your credit score).
- Personal Information: Ensure your personal information is correct, from name and address, to social security number, and more.
- Public Records: Make sure there are no records of filing for bankruptcy if you have not filed or a pending lawsuit that you’re not involved in.
- Inquiries: Inquiries listed for which you did not give permission for your credit to be pulled, such as test-driving a car. Companies cannot pull your credit report without your consent and too many inquiries could hurt your credit score.
- Unauthorized Accounts: An account listed on your report that you have not opened could be the work of an identity thief.
- False Late Payments: Making late payments on your loan or credit card will hurt your score, so it’s important to make sure there aren’t any records of late payments that you actually made on time.
- Closed Accounts: While it is good to have accounts that exist for a while in order to build credit history, ensure closed accounts aren’t incorrectly listed as open or it might look as if you have too much open credit. Also look out for accounts you closed that don’t indicate “closed by consumer” as it may look like the creditor closed the account.
- Any Other Indications of Fraud: As this is not an exhaustive list, look out for any other information on your credit report you deem to not be true.
Avoiding Identity Theft
If you find information that is outdated, fraudulent, or missing on any of your credit reports, you should dispute those items with the credit reporting agency that produced the report. The Fair Credit Reporting Act gives you the right to accurate reporting on your credit information.
Overall, 33 percent of U.S. adults have experienced identity theft, which is more than twice the global average. The majority of identity thefts are considered “crimes of opportunity,” so identity thieves often target those who don’t monitor their credit activity enough to catch red flags. Statistics show victims that suffer the most significant financial impact are those in which the thief opens new accounts in their name which go undetected longer than 6 months.
The more you understand what to look for on your credit history and the more diligent you are about looking it over, the better protected you can be. Citizens Bank is here for you and we hope you have a much better understanding, and appreciation, for the various elements that make up your credit score.