Credit 101

The Most Important Thing on Your Credit Report

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Focusing on just one part of your credit report won’t really help you improve your credit, because there are so many different things that determine your credit standing.

You may not want to pore over your lengthy credit report, but failing to do so could mean you overlook something significant. (If you want a guide to reading your credit reports, check out this cheat sheet.) That’s because there isn’t a single most important thing on your credit report, but you can prioritize looking over certain aspects of it.

Payment History

Credit.com’s Director of Consumer Education Gerri Detweiler said it’s hard to label one part of credit reports as the most important, but checking your payment history should be at the top of your priority list.

“That category of information contributes the largest percentage of your score, and it is very easy for a single slip-up to change it dramatically,” Detweiler said. “It can also be difficult to change.”

When looking at a credit report, you’ll see a payment history legend, which helps you see if your accounts are past due, went to collections, were charged off and so on. There are several codes, but the one you want to see is “OK.” If you check your credit scores regularly using a tool like the free Credit.com Credit Report Card, you’ll have an idea of how your payment history is affecting your credit scores, because the Report Card will give you a letter grade on how this factor is impacting your credit.

If you’re looking at your credit report and see a lot of payment history codes other than “OK,” you need to make sure the information is accurate. If it is, consider this a wake-up call to prioritize making your bill payments on time. If it’s wrong, you’ll need to dispute it.

payment history codes

Debt

Detweiler said looking at your debt is almost as important as reviewing your payment history, because it also plays a large part in determining your credit scores, which are in turn used by lenders to make loan decisions.

If you have a few credit cards with different issuers, you may not always think of your debt’s bigger picture — your credit report puts it together for you. If you’re not looking at how much debt you have overall, it can be easier to let it get out of control.

“If you have racked up a lot of debt, you can feel trapped for years while you pay it down,” Detweiler said. “On the other hand, there may be things you can do sooner such as consolidate high-balance, high-rate credit card debt with a low-rate personal loan, and possibly see some quick improvement in your scores.”

You want to pay attention to your debt levels to make sure you’re maintaining a low, manageable amount. You’ll see a credit limit listed for most accounts on your credit reports, as well as your most recent balance, and on revolving lines of credit (like credit cards), you don’t want those numbers to be too close. You want your overall revolving debt to be less than 30% of your overall available credit. The best credit utilization rates are lower than 10%.

Accuracy

If you’re looking at your payment history and see some codes you didn’t expect to, you may need to dispute them. Because payment history is crucial to your ability to access credit and get good interest rates, errors in this department can be very problematic. Each of the three major credit reporting agencies (Equifax, Experian and TransUnion) gives instructions on its website on how to dispute information on credit reports.

You don’t have to drive yourself crazy trying to make sure everything is perfect: Sometimes your employment information may not be up to date, or perhaps you see some “ND” or No Data codes in your payment history.

But for the most part, make sure the information on your report is correct. If you see a name, address or payment history code that is absolutely not correct, dispute it. Incorrect information could cause serious problems when you want to apply for a loan, and because it may take a while to resolve the issue, you don’t want to discover there’s a problem when you have no time to fix it.

More on Credit Reports and Credit Scores:

Image: Ingram Publishing

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