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. 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 annually using a tool like Annual Credit Report Request, 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.
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.
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.