The 5 Most Confusing Things on Your Credit Report

You know that you should review your credit reports. So you do. But when you do, you find yourself confused, wondering if it was worth it.

It definitely is.

Here are five things about credit reports consumers often find confusing, and how to find some clarity.

1. Boxes and More Boxes

The first thing you may notice when you get your reports are the boxes. Lots of boxes. These boxes detail your payment history over time — typically for the past seven years, which is the length of time that late payments and most other negative information can be reported.

Each box will indicate whether the payment in a particular month and year was paid on time or not. If you were 30 days late with your credit card payment in March 2009, for example, the box for that month will state “30” or something similar to indicate you were 30 days late.

Furthermore, it generally starts with the current month and works backward over time. So as you read these boxes on your credit report, make sure you understand the dates you are looking at. If your report says you were late on payments but you weren’t (as one of my reports recently did), then dispute the mistake.

You may see some boxes that don’t indicate any payment information; this can happen when the account wasn’t reported that month but it’s not something to worry about.

2. All Those Inquiries

The section of your credit report that lists inquiries into your credit may be longer than you expected, especially if you haven’t been shopping for credit and didn’t realize that your credit reports were being reviewed at all. And of course, you’re probably worried that all those inquiries will hurt your credit scores.

First, if you ordered your personal credit report directly from the credit reporting agency, the inquiries section should be divided into two sections: inquiries that affect your credit and inquiries that don’t. The ones that don’t are likely related to things like pre-approved credit offers, periodic reviews of your credit history by your current creditors or when you requested your own credit report. And as you might expect, they don’t figure into your credit scores.

In the section detailing inquiries that do impact your credit, you may see some company names you don’t recognize. That’s because the company you are doing business with may check credit under a different name.

For example, a couple of years ago I was considering assuming someone else’s car lease using one of the popular lease exchange websites. But the name of the company that checked my credit when I applied was different. When I checked my credit reports several months later, I had to think about it a while before realizing what triggered that inquiry. There should be contact information for any company listed in this section, so you can contact them if you aren’t sure why that inquiry is listed.

Also keep in mind that inquiries typically have a minimal impact on your credit scores. “In the industry we call them the ‘Fifth Factor’,” says Rod Griffin, director of public education for Experian. They may be listed as a factor affecting your scores, but there will always be something else that’s more important, he says.

3. All Those Student Loans

Consumers will ask, “Why do I see eight student loans when I have only one?” says Griffin. It’s because typically a new account entry is created with each student loan disbursement, which can happen every semester you borrow while in school. Generally, the fact that there are multiple student loans listed on your credit reports shouldn’t hurt your credit scores, as long as they are paid on time. There are some students, however, who believe the way student loans are reported has hurt their credit.

4. Collection Account Confusion

Collection accounts are another source of confusion. When consumers default on a loan or credit card and the account is subsequently turned over to collections, they are surprised to see that the original account is listed on their reports (usually as a charge-off) and the collection account is reported as well.

“You need to remember that it’s a credit history so it shows the charge-off of the original account and the collection account,” Griffin says.

The negative information about the original account can be reported for up to seven years from the date that occurred, while the collection account can be reported for up to seven years and six months from the date the original account became delinquent, leading up to when it was placed for collection. For all intents and purposes, the time periods those items can be reported end up being about the same.

If one account has been turned over to multiple collection agencies at the same time, though, that is a cause for concern and may require you to dispute some of those duplicate accounts.

5. Where’s My Score?

One of the top things consumers find confusing, says Griffin, is why their credit scores aren’t on their reports. While credit scores are calculated using the information in credit reports, they don’t always go hand in hand. “Credit scores are not part of credit reports. They are a separate process,” Griffin explains. “Scores don’t belong to the credit bureaus, they belong to the companies that develop them.”

Finally, Griffin insists that a great deal of credit report confusion can be cleared up if consumers just order their own reports directly from the credit reporting agencies. It’s when they get reports from their lenders — especially if they are merged reports listing information from more than one credit reporting agency — that consumers get overwhelmed. The reports that lenders get should have the same data, he explains, but they aren’t necessarily in a “plain English” format to make them easy for consumers to understand.

Consumers are entitled to free credit reports from each major credit reporting agency every year. Those reports don’t come with a free credit score, however; to get that you’ll need to pay for your scores or use a tool like Credit.com’s free Credit Report Card, which updates two of your credit scores monthly.