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Home > Financing > Credit Reports > Deciphering those credit reports

Source: WALL STREET JOURNAL
Cranky Consumer
By Brad Reagan

For being so boring, credit reports sure are big sellers.
Americans will buy six million of them this year, almost double last year's sales. Small wonder, because the reports are playing an increasingly big role in our financial lives and studies suggest that up to a quarter of all reports contain errors.

No longer are the reports used just for deciding things like interest rates on a loan. Today, some employers check them to screen job applicants, while insurance companies use credit scores in designing policies-a practice so controversial it has spurred 27 states so far to consider banning the practice.

As a result, dozens of companies are hawking various types of reports. We decided to order five different versions of our own report to see how easy they are to decipher. Three came from the major credit bureaus-Experian, Equifax and TransUnion-that compile information about your credit history from merchants and lenders. Others came from companies that repackage data from those three bureaus.

Because the industry is regulated, many elements are consistent. All the reports, for instance, tell who previously requested copies-so you can know who has been checking up on you.

But there are numerous subtle-and significant-differences in how the reports are sold and presented. One of the rudest surprises: One company that offers free reports, Consumerlnfo, automatically enrolls you in a $79.95-a-year "credit monitoring" program. The only way to opt out and avoid the big fee is to call the company up and cancel.

We were also startled to learn that the process of buying a credit report is no longer as easy as picking up the phone. Only two major providers-Equifax and Experian-offer the option of ordering a report over the phone; the rest required us to order online. Not that we're opposed to e-commerce, but sending our Social Security number out into the ether gave us pause. Most privacy experts say it's safe to send just about anything through an encrypted Web site, but it would have been reassuring to have more traditional options available (all of the sites we used were encrypted).

We ordered all the reports by snail-mail; only one-Fair, Isaac & Co.-offers solely online delivery. Still, it was one of the best reports. Fair Isaac includes a complete credit profile based on information from Equifax-but more importantly, it also has Fair Isaac's influential FICO score. In fact, it's the only place to get your FICO score, which is used nationwide by lenders to judge creditworthiness. With your score you can pretty much calculate what interest rate a bank should be willing to give you on a loan. One downside is that Fair Isaac isn't a credit bureau itself, so it isn't responsible for any mistakes in the report. The company provides phone numbers for contacting the bureaus, but the extra step is a slight nuisance.

Fortunately for us, there was only one derogatory item-a 60-day overdue payment from 1998 (a graduate-school year, sigh). Interestingly, however, the negative information was reported only by Equifax and Experian-it didn't show up on the TransUnion report. We learned a good lesson: Just because one bureau reports one thing, doesn't mean the others will show the same.

That's why we liked a three-in-one report from TrueLink (truecredit.com) which includes data from all three bureaus. You'll pay more for the convenience ($34.95), but it can be worth it to see the information from the three bureaus presented side-by-side.

We also called each company to ask a basic question about one of the accounts we discovered on our reports: an old credit card from years ago that we thought had been canceled. We were put on hold by True Link for 15 minutes, and by Experian for 11 minutes, but most companies answered in a reasonable amount of time. A TrueLink official said the company is switching to a new phone system that will improve response time. Experian said our experience was unusual, and typical wait times are about 3% minutes per call.

It took 66 minutes to get a response from Fair Isaac-but it isn't an entirely fair comparison: The company accepts only e-mail questions. Spokesman Craig Watts says the company will arrange phone calls for complex questions, but o that most customers say they prefer e-mail. "If that became important to our customers, we would consider adding that," he says.

You are eligible for a free report if you have been turned down for credit or for a job, however it must be requested within 30 days to receive it at no charge. Credit reports do not evaluate data, although they can often tell a story. They report your social security number, address, birthdate, the amount that you have borrowed, and how faithfully you have repaid.

The reports issued by the major credit bureaus may look different but they contain the same basic information. The main categories include columns for a company name, account number, whose account, date opened, date of last activity, high credit, terms, and date reported. Below is a general description of some headings that you may find in your credit report.

Whose Account: Advises who is responsible for the account and who uses it.

Months Reviewed: Updates you on the length of time that the account has been tracked.

High Credit: The highest amount that you have charged - or the credit limit-on a specific account.

Balance: The amount that you owe on the account at the time that the credit report was issued.

Status: Clarifies the account type (For example, I = Installment, O = Open, and R = Revolving) and the code explains the length of time that it takes you to pay on the account. Code examples are shown below:

Code 0 = Too new to rate; approved but not used
Code 1 = Pays within 30 days of payment due date, or not more than 1 payment past due
Code 2 = Pays between 30 and 60 days of payment due date, or 2 payments past due
Code 3 = Pays between 60 and 90 days of payment due date, or 3 payments past due
Code 4 = Pays between 90 and 120 days of payment due date, or 4 payments past due
Code 5 = Pays more than 120 days, or more than 4 payments past due
Code 7 = Making regular payments under debtor's plan or similar arrangement
Code 8 = Repossession (indicates if it is voluntary return of merchandise by the consumer)
Code 9 = Bad debt

Late Payment History: This symbology explains how often you have made late payments and the amount of time that you have been late making payments. For example, 30(01) means you paid 30 days late one time, 60(01) means you paid 60 days late one time, etc. This line also shows the two most recent late payments and the first late payment that you made.

Some surveys in the past have indicated that up to 48% of credit reports checked had errors. It is important to check your credit report periodically to ensure it does not have any mistakes. Some common errors on credit reports include the following:

• Neglecting to remove damaging information after an issue has been resolved
• Neglecting to add changes or comments from you or your creditors
• Including incorrect information
• Confusing you with another person who has a similar social security number or name