This is certainly a different kind of report card–and one that teens will want to pass with flying colors at some point. Your son or daughter will need to learn the importance of obtaining a copy of his or her credit report, so they can see what creditors are saying about them. But credit reports can be a little confusing. The following is a step-by-step explanation for your teen to read and interpret sections of their credit report.
Here they'll find identifying information like their:
- name
- current address
- social security number
- date of birth
- spouse's name (if applicable)
Easy, right? But don't just skim over this section. Read all the entries to make sure everything is correct. One bad piece of information and the credit history listed on your report could be wrong.
This is the meat of the report. It contains a list of your open and paid credit accounts and indicates any late payments reported by your creditors. Although it may seem a little tedious, it's essential that they read through this section very thoroughly. If they find any information that is incorrect or accounts that don't belong to them, they'll need to submit a dispute letter to the credit-reporting agency. The basic format for the credit history section (see sample) is as follows:
Company Name - identifies the company that is reporting the information.
Account Number - lists your account number with the company.
Whose Account - Indicates who is responsible for the account and the type of participation you have with the account. Abbreviations may vary depending on the reporting agency but here are some of the most common:
I - Individual
U - Undesignated
J - Joint
A - Authorized User
M - Maker
T - Terminated
C - Co-maker/Co-signer
S - Shared
Date Opened - This is the month and year they opened the account with the credit grantor.
Months Reviewed - Lists the number of months the account history has been reported.
Last Activity - Indicates the date of the last activity on the account. This may be the date of their last payment or last charge.
High Credit - Represents the highest amount charged or the credit limit. If the account is an installment loan, the original loan amount will be listed.
Terms - For installment loans, the number of installments may be listed or the amount of the monthly payments. For revolving accounts, this column is often left blank.
Balance - Indicates the amount owed on the account at the time it was reported.
Past Due - This column lists any amount past due at the time the information was reported.
Status - A combination of letters and numbers are used to indicate the type of account of the timeliness of payment. Abbreviations for the type of account are as follows:
O - Open
R - Revolving
I - Installment
Abbreviations for Timeliness of Payment varies among agencies. Numbers are used to represent how current they are in payments. Current or paid as agreed is usually represented by 0 or 1. Larger numbers (up to 9) indicate that an account is past due.
Date Reported - Indicates the last time information on this account was updated by their creditor.
This probably doesn't apply to your teen, but if young adults have had any accounts referred to collection agencies in the last seven years, this is where they will be reported. The name of the collection agency will be listed along with the amount you owe and, in some cases, their contact information. If a collection is listed on their report that doesn't look familiar to them, they should contact the credit bureau and submit a dispute letter.
For their own piece of mind, they may also want to contact the collection agency to determine the nature of the account. Here's why.
They may find out that the collection account is not theirs. Perhaps it belongs to someone whose name or social security number is very similar to theirs. If this is the case, ask the collection agency to acknowledge this fact in writing. They should send a copy of the letter to them AND the credit reporting agency so that the mistaken information can be cleared from your report.
They may find out that the collection account is theirs. If so, it is in their best interest to determine the accuracy of the amount of the collection account and make arrangements to satisfy your obligation as quickly as possible. Once the collection account has been paid, they should request a letter from the collection agency to this effect. Again, make sure the credit reporting agency gets a copy of the letter so that they can list the account as paid.
This section may also be referred to as Public Records. Here they'll find a listing of public record items (obtained from local, state and federal courts) that are reflective of their history of meeting financial obligations. These include:
- Bankruptcy records
- Tax liens
- Judgments
- Collection accounts
- Overdue child support (in some states)
They should look closely at all the information listed here. If anything is mistaken, contact the credit bureau and submit a dispute letter.
This section consists primarily of former addresses and past employers as reported by their creditors.
Contains a list of the businesses that have received their credit report in the previous 24 months. If they find names of businesses that sound unfamiliar, they should find out who they are and why they're looking at their credit. The credit-reporting agency may be able to help with contact information. Remember, only companies that have received their written authorization should be able to check your teen's credit history.
The length of time that information remains in their file varies.
- Credit and collection accounts will be reported for 7 years from the date of the last activity with the original creditor.
- If they've filed a Chapter 7 or Chapter 11 bankruptcy, this information will be reported for 10 years from the date filed.
- All other courthouse records will be reported for 7 years from date filed.
Courtesy of Consumer Credit Counseling Services