13 - How to Read Your Credit Report

Your credit report is the official story of your financial life—but is it telling the truth? In this episode, we provide a step-by-step guide to pulling your free annual credit report from the only official source. We'll teach you how to decode the four key sections of your report, how to spot common errors or red flags for fraud, and the exact process for formally disputing an inaccurate item with the credit bureaus to protect your score and your reputation.

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Transcript

Episode 13 | How to Read Your Credit Report

00:00:00 Daniel Hill: Shanna, have you ever felt that little jolt of anxiety when you're applying for something, a credit card or a car loan, and you get to the part where it says, by checking this box, you authorize us to pull your credit report.

00:00:13 Shanna Browning: Oh, yeah. Absolutely. It feels like you're about to be judged by this secret, mysterious document that you've never even seen, and you're just hoping that everything is okay.

00:00:23 Daniel Hill: Exactly. It's like a report card that follows you around for your entire adult life. But no one ever taught you how to read it or check it for mistakes.

00:00:33 Shanna Browning: And we know in this industry that's a huge problem, because mistakes on your credit report are surprisingly common and they can cost you real money. Today, we're going to pull back the curtain on that mysterious document and give you the confidence to read it and own your financial story.

00:00:59 Daniel Hill: Welcome back to Making Sense of Your Cents. I'm Daniel Hill.

00:01:03 Shanna Browning: And I'm Shanna Browning. In a previous episode, we talked about what makes up your credit score. Today we're going to go one level deeper to look at the document that that score is based on your credit report.

00:01:17 Daniel Hill: We're going to show you how to get it for free, what to look for and most importantly, what to do if you find an error.

00:01:24 Shanna Browning: All right, Daniel, let's start with the most important first step. How do people get a copy of their own credit report? There are so many websites out there offering free reports and it can be confusing.

00:01:35 Daniel Hill: It can be very confusing and you have to be careful. Many of those sites are just trying to sell you a credit monitoring subscription you don't need, but by federal law, you're entitled to a truly free copy of your credit report from each of the three major credit bureaus Equifax, Experian, and TransUnion every single year.

00:01:55 Shanna Browning: And those are really the big three. And what is the official safe place to get those?

00:02:00 Daniel Hill: Well, like we mentioned in episode three, the only official website is Annualcreditreport.com. I'll say that again because it's very important. Annualcreditreport.com. This is the only site authorized by federal law. Going there is safe, secure, and completely free. You don't have to enter a credit card number or sign up or any trial service.

00:02:23 Shanna Browning: So when someone goes to that website annualcreditreport.com, what should they expect?

00:02:30 Daniel Hill: The site will guide you through a verification process to confirm your identity. It'll ask you for your name, address, social security number, date of birth. It will likely also ask you some security questions based on your credit history, like which of the following addresses have you been associated with? Or you may have a mortgage with which of the following lenders. This is to ensure that you and only you are accessing your report.

00:02:54 Shanna Browning: And can you get a report from all three of the bureaus at once?

00:02:58 Daniel Hill: You can. And a good strategy is actually to pull all three at the same time, at least once a year, to do a thorough checkup. Another strategy is to stagger them, pulling one report every four months. This allows you to keep an eye on your credit throughout the year for free. For today's purpose, let's assume we're doing a full annual checkup. And we've downloaded all three reports. All right, Shanna, we have the reports in front of us. They can be long and look a little intimidating. Let's break it down. What are the main sections people will see?

00:03:32 Shanna Browning: Generally, every credit report is broken down into four sections. The first is personal information. Pretty straightforward. It lists your name and any other variation you've used. Current and former addresses, your Social security number, date of birth, and current and past employers.

00:03:50 Daniel Hill: What should people be looking for here.

00:03:52 Shanna Browning: Accuracy. Look for any misspelled names, incorrect addresses or anything that doesn't belong to you. An unfamiliar address could be a simple typo, or it could be a red flag for potential identity theft.

00:04:07 Daniel Hill: Oh that's good. So that section one what's next?

00:04:11 Shanna Browning: Section two is your credit accounts or tradelines. This is the heart of your report. It's a detailed list of every credit account you have or have had in the past seven to ten years. This includes credit cards, mortgages, auto loans, and student loans.

00:04:28 Daniel Hill: And each of those account listings has a ton of details, right?

00:04:32 Shanna Browning: Yep, it sure does. For each account, you'll see the name of the lender, your account number, the date you opened it, your credit limit or the original loan amount, the current balance, and most importantly, your payment history. This is usually a grid of boxes showing whether you paid on time for the last twenty four months or more. Okay. Means you paid on time. Thirty means you were thirty days late, sixty for sixty days late, and so on. Don't be there.

00:05:02 Daniel Hill: And this is the section where you really want to be a detective. Make sure you recognize every account that's listed. If you see an account you don't recognize, that is a major red flag. Also, check your payment history. If you know you've never missed a payment on your car loan. But the report shows a thirty day late payment, that's an error and you need to fix it.

00:05:23 Shanna Browning: Absolutely and quickly. After the credit accounts, the third section is credit inquiries. This section is split into two parts - hard inquiries and soft inquiries.

00:05:35 Daniel Hill: Now we've talked about those before but what's the difference?

00:05:38 Shanna Browning: So a hard inquiry is recorded when a lender pulls your credit report because you have applied for new credit. So when you apply for a mortgage, a car loan or a new credit card that generates a hard inquiry. Too many of those in a short period can temporarily lower your credit score, because it can look like you're desperate for credit. Those are the inquiries that matter.

00:06:04 Daniel Hill: And what about soft inquiries?

00:06:06 Shanna Browning: So soft inquiry happens when your credit is checked for a reason other than a new application. This includes when you check your own credit, when a current lender reviews your account, or when a company pulls your credit to send you a pre-authorized offer in the mail. Soft inquiries are only visible to you, and they have zero impact on your credit score.

00:06:28 Daniel Hill: So you want to review the hard inquiries to make sure they match your recent applications. If you see a hard inquiry from a lender you've never contacted, that's another potential sign of fraud, right?

00:06:39 Shanna Browning: You better believe it is. And in the final section is public records and collections. This is where you would see any major negative financial events like a bankruptcy, foreclosure, a tax lien, or an account that a creditor has sent to a collection agency. For most people, this section will be empty, which is a good thing.

00:07:00 Daniel Hill: Very, very good thing. Okay, so we reviewed all four sections. Let's say we found a clear mistake. Maybe it's a late payment that we know we made on time, or a collection account for a medical bill that was supposed to be covered by insurance. What do we do?

00:07:16 Shanna Browning: You have the right to dispute any information on your credit report that you believe is inaccurate. The process is straightforward, but requires you to be organized. The first step is to contact the credit bureau that is reporting the incorrect information.

00:07:33 Daniel Hill: And you have to do that for each bureau that shows the error, right?

00:07:36 Shanna Browning: That's a critical point. The three credit bureaus are separate companies. A mistake might appear on one report, but not the others. You have to file a separate dispute with each bureau that has the error. You can typically do this online through their websites, which is the fastest method or you can do it via mail.

00:07:57 Daniel Hill: What information would you need to provide?

00:08:00 Shanna Browning: You need to clearly state your name and address. Identify the specific item on the report you are disputing, the account name and lender name. Explain exactly why you believe it's an error and request that it be removed or corrected. It's also very important to include any copies of any documents that support your claim.

00:08:21 Daniel Hill: So what kind of documents would be helpful in this situation?

00:08:26 Shanna Browning: Copy of a bank statement showing you made a payment on time, a letter from a lender confirming an error or a receipt from a collection agency showing a debt that has never been paid. But you know you did pay. Never send your original documents. Always send copies. Keep a detailed record of everything you send and when you sent it.

00:08:47 Daniel Hill: So now we've filed the dispute. What happens next?

00:08:51 Shanna Browning: By law, the credit bureau generally has thirty to forty five days to investigate your claim. They will contact the lender or the creditor that provided the information and ask them to verify it. If the lender cannot provide the information is accurate or if they don't respond, the credit bureau must remove the disputed item from your report. They will then send you a letter with the results of their investigation.

00:09:18 Daniel Hill: This has been an incredibly empowering conversation. Now that we know how to get a report, it's time to actually dig in. And that brings us to this week's actionable tip.

00:09:33 Shanna Browning: Your action item for this week is the Highlighter test. If you haven't already, go to All credit report.com and save your reports as PDFs. Then print them out.

00:09:46 Daniel Hill: Now grab two different colored highlighters. Let's say green and yellow. You're going to go through your report line by line with green highlighter. Mark everything that you know is one hundred percent accurate. Your name, your address. That car loan you opened last year with the yellow highlighter mark. Anything that makes you pause an old address. You don't recognize, a credit card you don't remember opening, a payment history that shows thirty days late when you know you paid on time.

00:10:16 Shanna Browning: This simple exercise turns a boring document into an active review. Go through every section, your personal info, every single account, and all the hard inquiries.

00:10:28 Daniel Hill: When you're done, your report will be a visual map. The green is everything that's good and verified. The yellow is your personal to do list. Each yellow highlighted item is something you need to investigate further, and it's the starting point for filing a dispute if needed.

00:10:45 Shanna Browning: Now, the goal this week isn't to fix anything yet. It's simply to review and identify. This one action will give you more clarity and control over your financial story than you've ever had before.

00:10:58 Daniel Hill: It's a foundational step, and we're excited for you to take it. We'll build on it next week with strategies for building or in some cases, rebuilding your credit history from the ground up.

00:11:11 Shanna Browning: Be sure to subscribe so you don't miss it. For Daniel Hill, I'm Shanna Browning. Thanks for making us a part of your week.

00:11:18 Daniel Hill: And remember, go out and make some sense of your cents.