Many people feel overwhelmed when they first glance at their credit reports. They see numbers, letters, and codes that don't seem to make sense.
Credit reports can seem mysterious and complicated because the information is coded in a way that is not easily read by the average consumer. A key that interprets the codes and indicators should accompany each credit report. The first thing to look for when reading your report, are items that are not true, items that are incomplete, and items that are missing.
Credit ratings and credit scores
It is important to understand the difference between your credit score and a credit rating. A credit report will have one credit score and possibly several credit ratings.
Your credit score is a number that reflects your overall credit worthiness. It is a three-digit number between 300 and 900. Equifax will have a credit score for you and TransUnion will have a credit score for you. These two scores are independent of each other because Equifax and TransUnion are competitors. Credit scores are not part of your credit report, they are a separate service provided by credit bureaus that you pay extra for.
A credit rating is a rating such as R1 or R2 assigned to each item reported on your credit report. Since there are often many items on your credit report, and each item is "credit rated", you will have several credit ratings. The ratings are not subjective; they are assigned based on how current the balance is in the account being described.
Credit Inquiries
Every time you apply for credit, and the credit grantor checks your credit report, a credit inquiry is placed on your file. Frequent inquires in a short time will set off an "alert" message on your credit file. However, getting your own credit report does not show up as an inquiry.
Credit inquiries can be bad for your credit score because a number of credit inquiries in a short time can indicate to a lender that you are a "credit seeker" and may be experiencing financial difficulties.
