Your Credit Translation Guide

If you feel like you need a translator to interpret your credit reports and scores, you are certainly not alone. Yet while most people are not “fluent” in credit, your lenders are. This means that for you to make informed credit decisions, you need to be able to decipher what’s on your reports and understand what your credit scores are telling lenders about you – and why. In honor of National Financial Literacy Month, we’re here to help you begin to speak their language!


Your credit file is created the moment you have your first transaction with a creditor – and it follows you throughout your life. The three major credit bureaus, TransUnion®, Equifax® and Experian®, collect and maintain the data in your credit file that gets reported by your creditors. It shows how well (or poorly) you manage your credit accounts, also known as tradelines. The credit bureaus then provide this information in the form of a credit report to potential lenders, etc., when authorized. Your credit score (or credit rating) is calculated based on information in your credit reports. Those scores help lenders assess your credit risk – the risk of default on the debt. Lenders also use the scores to determine your interest rates and credit limits.

People with few to no credit accounts or a short credit history are said to have a thin file. This means the credit bureaus do not have enough data or loan repayment information to generate a credit score.


Credit scoring models are statistical formulas used to calculate your risk level of default on a debt when seeking mortgages, vehicle loans, personal loans and credit. This risk level is translated into a credit score. The higher the score, the more favorably you are viewed by lenders. There are numerous scoring models – and each is adjusted to assess specific risks based on the industry and type of loan/credit you are seeking. For example, a mortgage lender will have different risk criteria than a credit card company or auto lender.

If you have a significant history of delinquencies, bankruptcies or collections, you are likely to be categorized as high risk – indicating to lenders that you are more likely to pay late or default on debt. This means that if you can even get lender approval, you will probably pay a much higher interest rate to offset your high-risk level. On the other hand, if you have responsibly managed your debt and your credit rating reflects that, you may be considered a prime borrower – which is exactly who lenders want. Prime borrowers are typically easier to approve, and usually enjoy much lower interest rates.


The discussion of personal information in the credit scores and reports space refers to your name, aliases, date of birth, current/previous addresses and social security number. You may see current and previous employers listed on your reports if a lender provided such information when reporting on a credit account opened in your name. While this personal information appears on your credit reports, it is used for identification purposes and has no bearing on your credit scores – it is not an indicator of creditworthiness.

Other information that has no impact on your credit scores and you should NOT see on your credit reports includes your gender, race, religion, national origin, marital status, political affiliation, medical history, criminal record, salary or other compensation, occupation and whether you receive public assistance.


Credit obligation is an agreement by which you are legally bound to repay money that you have borrowed. Lenders assess your credit risk by analyzing how well you manage your credit obligations – both past debts and your current debt, also known as your outstanding debt. They examine your Payment History, which accounts for 35 percent of your credit score. Your payment history contains the Account Status or Pay Status, which reflects the current status of the account (such as paid, past due, etc.) as of the date the information was reported.

Credit scoring models look favorably on tradelines that display account status notations such as Paid-As-Agreed, Current or Never Late. A notation such as Past Due, which is an unpaid amount beyond the payment deadline, receives a negative mark in scoring models, which will often include a timeframe that could range from 30, 60, 90, 120 days or more past due. Even more damaging to your scores is an account status of Delinquent, a term typically applied when the account is 60 or more days past due.

Other negative comments that could whack your scores include Collections, accounts sent to an agency for recovery of all or a portion of debts, or Settled, accounts where a creditor accepts less than the full amount owed by the borrower. If an account has been Charged Off, meaning it is deemed uncollectable by a creditor, that will also be noted on your report along with the charged-off amount. However, by law, late payments and other negative information should drop off your credit reports in seven to 10 years.

Keep in mind that your credit reports are only as accurate as the information provided to TransUnion, Equifax and Experian by your creditors – and “misinterpretations” do happen. Monitoring for account changes, late payments and unauthorized activity can help prevent your credit scores from getting lost in translation.

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