Home > Credit 101 > Why Are Credit Reports So Hard to Understand?

Comments 0 Comments

Does trying to read your credit report feel like you are reading another language entirely?

This is a perfectly normal reaction when reading one of your reports for the first time or if you are not in the habit of reviewing your credit reports regularly.

“While your credit reports may be hard to read at first, once you get familiar with them, you learn how to read the reports, what the different sections and markings mean and what is normal for your reports,” said Barry Paperno, a credit expert who blogs at Speaking of Credit.

Here are some reasons credit reports can be hard to understand, as well as how you can learn to read them like a pro.

Credit Reports Are Industry Reports With Many Codes & Abbreviations

Paperno explained that credit reports were originally created for credit industry use, which could be a large part of what makes them intimidating and confusing.

“The reports are coded and abbreviated so lenders — and credit score models — can gloss through the reports looking for credit red flags,” he said.

Even with so many codes and abbreviations originally intended to be used by credit industry experts, it is possible — and fairly easy — to discover what they mean. Credit reports come with their own abbreviation and code key charts you can easily reference to help you define a code you don’t understand.

You Have a Different Credit Report With Each Credit Bureau

There are several different credit bureaus, each reviewed for different purposes. However, there are three main ones that will give you the best idea of where your credit stands. Not only are there several to look at, but each of the three main credit bureaus — Experian, Equifax and TransUnion — has a different way of displaying the information on their reports.

For example, when describing payment history for accounts, one report may use green squares to denote current payments while another bureau might simply mark them with a “C” and still another report might mark each account current with a “1.”

“Not only are the codes and the formats different across the credit bureaus and within their different credit products, but they can also differ with outside credit monitoring and credit score service providers,” Paperno said.

To help you get a better understanding of your reports, Paperno advised getting familiar with the three free reports offered yearly at AnnualCreditReport.com first. Then, choose one and get to know how it works before moving on to the next one. It’s always a good idea to review each of them, as they don’t all contain the same information. While you only get one free copy of these three reports each year, you can get a free credit report summary, updated every 14 days, on Credit.com.

Give Yourself Time (& the Right Conditions) to Read Your Reports

Because these reports allow lenders to analyze your creditworthiness, there is a lot of information in them about how you handle your credit accounts. In fact, the information reported on them typically spans at least the last seven years — maybe even longer, as the age of any older accounts you currently use is also included. (Note: The age of your credit accounts makes up 15% of your overall credit scores.)

With so much information packed into each report, reading your credit report on the fly on your smaller smartphone screen can be difficult and problematic.

“You’d have to do a lot of scrolling back and forth and you might miss something important when reviewing credit reports on your phone even though many service providers offer a mobile app,” Paperno said.

Instead, he advises giving yourself time to read the report thoroughly, especially if you’ve had credit problems, are trying to rebuild your credit or you’ve disputed errors on the report.

“If you have a low credit score, you really want to sit down, print the reports out if possible and go through them with a fine-tooth comb,” he said. “You want to identify and highlight what is hurting your credit and make sure there are no errors that could be causing a low credit score.”

Even if you are familiar with your credit reports and you have good credit scores which have not changed much, it’s still a good idea to review each of them for errors, like new accounts reported which aren’t yours, as this is a common signal of identity theft.

Image: Catherine Yeulet

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team