Understanding Your Credit Report

I got a number of questions about how to read your credit report so in this post we will go through the highlights. There is a ton of information presented for each credit card you have or have had in the past. All this data contributes to your credit score.

This is going to be in key terms rather than the usual action list. Sit down with your credit report and follow along.

Page of personal and biographic information

Pretty straightforward just make sure your information is correct and up to date.

Next you will find details on every source of credit you have or had. For each line of credit you will have a month-by-month breakdown and then a summary.

High Credit

The highest balance you have had on this line of credit. This is a key number. This is key to calculating your credit ratio – the amount of your credit you use every month. To get max scores here you want less than 50% and ideally less than 30%.

credit ratio = credit limit / high credit

For example if your credit limit is $1,000 you don’t want your high credit to be more than $333. If you have some room for improvement check out the post on your credit ratio and the ammount you owe.

MOP or Usual Manner of Payment

This is a one number summary of your payment history. Do you pay on time or late? How late? Are you in collections or a payment plan? If this number is anything worse than a 1 review how to improve your payment history.

1 is the highest score – pays within 30 days of billing
all the way to
9 is the lowest score – bad debt, placed for collection; skip

You should see this listed for every month and an overall summary number.

Balloon payment

A balloon payment is a single large payment – usually at the end of a lending period. On a credit card it usually means you took out another line of credit to pay the first one off. To get the maximum score this should be a long column of 0s.

Charge Off

This is an amount the lending company has written off (decided they have little chance of collecting it from you). This could be because you are over 120 days late, you have closed the account with a balance owing, or are no longer responding. Again top marks go to a long line of 0s.

Narrative

This is any additional information. For example that the account was closed at the consumers request (neutral) or closed at the creditor’s request (negative). There may be no codes or multiple two-letter codes. Each will show up in the legend section.

Payment History

This will have the number of months you have paid a balance, the number of times you were 30, 60, and 90 days late. This is a summary of the age of your credit and if you pay on time (Payment History LINK). You want a high number of months paid and zero late payments of 30, 60, or 90 days. If you have late payments the easiest and most effective thing to do is set up automatic payments.

Public Information

This is any information collected about you through the courts, government, or other public record. This includes things like: bankruptcy, civil judgement, tax liens, garnished wages, and anything else decided upon in the courts. Check this section carefully for any errors or records that are more than seven years old. To get a top score you want nothing in this section. Any public information recorded here has a negative impact on your credit score and the impact can be large.

Credit Related Inquires

Also know as hard inquires – when a lender checks your credit score and/or report to evaluate if they want to extend you credit. You should only see companies you authorized to check your credit score and only at the time you authorized it. A long list of inquires in this section can have a negative impact on your credit score. If you notice a long list check them and read more about New Credit.

Non-Credit Related inquires

This is most often companies you are looking to do business with you. For example if you were pre-approved for two mortgages both lenders would show up there. As well as the three companies you got a home insurance quote from. They check your credit before allowing you to pay your bill after they deliver the service (called post-paid). This also includes any inquires you make on your credit score.

Check that you recognize all the lenders on this list. If you don’t it could be a sign of fraud. These inquires do not impact your credit score.

Account Review Inquires

Lenders who you have an ongoing relationship with (aka an active credit card or loan) are able to periodically check your credit report and score. Check that you recognize all the lenders on this list. If you don’t it could be a sign of fraud. This kind of inquiry has no impact on your credit score.

Links

Canadian government credit report details

TransUnion information on how to read your credit report – this is the US report, I couldn’t find a Canadian version

Equifax detailed explanation of the credit report – again the US version, I couldn’t not find the Canadian version.

Did you enjoy this article?
Signup today and receive free updates straight in your inbox. We will never share or sell your email address.