How to Read a Credit Report, Line by Line

A credit report is read in eight steps, and not from the top. The household checks the identity details first. Then the household lists every account and marks any it does not recognise. The payment grid is read across, not down. The limits go on a sheet. The enquiries go on the same sheet. The oldest line is found and its date written down. Anything wrong is written down beside it. Each wrong entry is then raised with the company holding the record.

Here is what sits underneath that answer. A credit reportThe record of a borrower's credit lines as it is supplied on request, either to the household the record is about or to a lender considering an application. is a long document arranged for the convenience of whoever prints it, and the arrangement is not the order in which it is useful to read. The opening sheet carries the things a household already knows by heart. The entries that decide anything sit further in.

An electricity bill handed across a counter works the same way. The top third is the name, the address and the consumer number, and the eye slides straight past all of it because it has been seen four hundred times. The line that would actually tell a reader something, the one where the meter reading changed, sits below the fold. Reading top to bottom means arriving at it tired, if arriving at it at all.

The printed order puts what a household already knows at the front and what it has never seen at the back, so a credit report is read in a different order from the one it is printed in. The eight steps below reverse that order. Each step is an instruction and nothing else: what to look at, in what order, and what to write down at each stop. What a credit record is and how a score is computed belong elsewhere, and not one of the eight steps stops to explain them.

Before the steps begin, one thing about the document itself. Five kinds of thing are printed on a report, and only two of them are debts. A household that reads only for what it owes will read two sections carefully and walk past three. Two of the three walked past are exactly where a mistake hides quietly for years.

How is a credit report obtained, and does asking for it change anything?

Step one is the one that stops most people, and it stops them before they have read a single line. So do it deliberately.

A household in India is entitled to its own record. The household asks the credit information company for it, identifies itself the way that company requires, and the company supplies the report. There is more than one such company, each holding its own file built from what lenders send it, so a report from one is not necessarily identical to a report from another. If a household has ever been refused something and cannot see why, the file that was actually looked at may not be the file it has in its hands.

Two instructions for step one, and they are both about what is asked for. The request is for the report, not the number. The number is one line and it explains nothing; the report is the evidence and it is the only thing that can be corrected. And two things go down the moment the report arrives: the date it was obtained and which company supplied it. Six months later, when something needs raising, both of those become the first questions anybody asks.

Requesting one's own record is recorded as a different kind of look from a lender requesting it, and the belief that it is not is the single most common reason a household never looks at all. How each kind of look is treated is set by the credit information companies and by their supervisor, the Reserve Bank of India. The current position appears at rbi.org.in.

Why are the identity details checked before any account?

Step two is the whole reason this reading order exists, and it takes about four minutes.

The identity sectionThe block of personal details printed at the top of a credit report: the name, the date of birth, the identifiers, the addresses and the telephone numbers held against the file. is the block of personal details at the top. Every line of it is read, out loud if that helps: the spelling of the name, the date of birth, each identifier, each telephone number, and then every address, including the old ones. A mark goes against anything that does not belong to the household. Not anything that looks odd. Anything that does not belong.

Here is why this comes before any account. Picture a building with two households on the second floor and a shared postbox, and one surname spelled almost the same way on both doors. The post gets mixed maybe twice a year, and everybody sorts it out over a cup of tea. Now take away the tea and the neighbours, and put the sorting inside a computer that matches names, dates and addresses sent to it by dozens of lenders. When it matches wrongly, nobody knocks on the door to say so.

An address that does not belong to the household is the usual route by which somebody else's account arrives on the record, so finding a wrong address first explains everything strange that appears below it. Reading the accounts first means an hour spent puzzling over a loan nobody remembers taking. Reading the addresses first means that loan is already explained before it is reached.

One more instruction for step two. If an employer is shown, it is checked, and if a household member's details appear against the file, that is marked too. None of this is about the money. Step two asks only whether the document in hand describes the household.

How is every account listed, and what is marked as not recognised?

Step three is clerical. Get a sheet of paper and write one line per account, and do not leave out the closed ones.

Five things go on each line: who lent, what kind of credit it was, the date it was opened, whether it is open or closed, and what is owing on it now. That is it. No judgement, no arithmetic, no view about whether an account was a good idea. The report is being copied onto a sheet the household controls, and that sheet earns its place by fitting on one side of paper while the report does not.

Then comes the comparison that makes the step worth doing. Beside the report's list goes the household's own list of what it owes, from memory and from the drawer where the papers live. The two lists are read against each other in both directions. An account on the report that is not on the household's list is not recognisedAn account printed on a credit record that the household did not open. The account is marked at this stage and raised later; it is not assumed to be fraud and it is not assumed to be a mistake. and gets a mark. Something on the household's list that is not on the report is not an error at all, and the reason is worth knowing.

A credit record holds only what lenders report to it, and a great deal of household debt is owed to people who report nothing to anybody, so the two lists are never supposed to match. The difference between them is not a gap in the record. The difference is the boundary of what the record was ever built to hold.

The Bhosale household is a plain example of the gap. On 31 March of year two it owed Rs 48,594/- on its card, Rs 8,000/- on a pay-later plan for Ira Bhosale's school tablet, and Rs 15,000/- to Ashok Bhosale's brother, with no interest, no written date and no schedule. All three are real obligations in that house. Nobody reports a brother, so two of the three are on the report and one is not.

Which way is a payment grid read?

Step four is the one worth slowing down for, and it is where a careful reader most often goes wrong.

A payment gridThe month by month record printed against one credit line, showing for each month whether an amount stood unpaid past its date and, where it did, how far past. is printed as a table. Months run across the top, accounts run down the side, and every cell says what happened on that account in that month. A grid looks exactly like a timetable, and a timetable is read by finding today's column and looking down it. The timetable instinct is the trap, and the whole of step four is the instruction to resist it.

Here is the instruction. One account is taken. A finger goes on its earliest month, at the left-hand end of its own row, and moves right, one month at a time, all the way to the most recent. Each month is said aloud along the way: clean, clean, clean, late, clean, clean. The finger then lifts, drops at the left-hand end of the next account, and does it again. One account at a time, left to right, until every row has been travelled.

Reading across one account shows a sequence. A sequence is the only thing on the whole report that tells an isolated event apart from a pattern. Reading down a column compares three unrelated accounts in the same calendar month, and nobody was asking that question.

For every month that is not clean, write down three things: which account, which month, and what sits immediately either side of it. The third of those is not decoration. Two clean months either side of a single late month is a completely different sentence from three late months in a row, and the mark in the cell is identical in both.

Why are the limits written down when a limit is not a debt?

Almost everybody skips step five, and it takes two minutes. A limitThe most that may be drawn on a revolving credit line, such as a card. The limit is a ceiling rather than an amount owed. is a ceiling and nobody owes a ceiling.

The instruction is to write the printed limit beside every revolving line, and then to set it against the limit the household was actually given in its contract. Two columns, side by side, and a tick where they agree. Those two columns are the whole step.

The limit belongs in the reading because it is the denominator of the ratio the record reports, so a limit printed wrongly makes that ratio wrong through no act of the household at all. For the Bhosale household the two columns agreed: Rs 60,000/- printed, Rs 60,000/- contracted, and the balance of Rs 48,594/- against it. Had the report shown a smaller ceiling than the contract does, the same unchanged balance would have been described as filling far more of the line than it does, and the household would have had no way of knowing that from looking at its own bank statements.

There is an everyday version of this that makes it stick. A shopkeeper writes in a ledger that a customer may take goods up to Rs 5,000/- on credit, and the customer has taken Rs 4,000/-. Now the shopkeeper's assistant copies the ledger and writes the ceiling as Rs 4,500/- by mistake. The customer's conduct has not changed by a rupee, and to anybody reading the copy the customer now looks a great deal closer to the edge. The error is in a number the customer never wrote, so nothing the customer can do fixes it.

What is an enquiry, and what does one that cannot be placed mean?

Step six is a list and a set of ticks. An enquiryA recorded instance of somebody looking at a credit file. The entry records that a look happened and by whom, and it is not a borrowing. is a recorded instance of somebody looking at the file, and the report prints them with dates and with who did the looking.

Each one goes on the sheet with its date and its name. The household's own year is then gone through, and the ones it can account for are ticked: the month somebody applied for a card, the week a loan was arranged, the day a plan was taken at a counter for a school tablet. Ticks are boring and that is fine. The enquiry with no tick beside it is the one step six hunts for.

An enquiry that cannot be placed means somebody checked the file. A record of a look is not a record of a borrowing, so the entry is worth asking about and not worth panicking about. No money moved. No account was opened. Something was looked at, and the household is entitled to ask who and why.

Two ordinary explanations account for most of them. The first is an application the household made and then forgot, and forgetting happens far more often than people expect. The second is a check made by an organisation the household did deal with in some other capacity. If neither fits, it goes on the sheet for step eight with the others.

Where is the oldest line, and why is its date written down?

Step seven is a single scan and a single date. Run down the column of opening dates, find the earliest one, and write it on the sheet with the name of the account beside it. The account with the earliest date is the oldest lineThe earliest account still shown on a credit record. The distance from its opening date to today is what the length of the record measures., and the distance from that date to today is what anybody means when they talk about how long a record has been running.

The column of opening dates carries something else worth noting: the accounts that are closed and still printed. A household that has cleared a loan often expects it to vanish, and is unsettled to find it still sitting there. A closed account sits there as evidence rather than as an amount owed, and the reading treats it that way. Step three said to list closed accounts for exactly that reason.

The date of the oldest line is written down because it is the one fact on the report that no action can improve and one action can shorten, so it is worth knowing before any decision is taken about tidying up an old account. Whether an account should be kept or closed is a separate question. The date goes down first. Whatever is decided later is then decided with the date in front of the household.

On the Bhosale household's report the earliest opening date belongs to the card, taken two years before year two began. The record was therefore about three years old by the end of year two. Every other line on the file is younger than that, including the two-wheeler loan that ran for thirty months and closed in January of year two.

What is written down at the end, and where does each finding go?

Step eight turns a reading into a document. A clean sheet is ruled into three columns: what is printed, what is true, and what evidence the household holds. Every mark made in steps two to seven becomes one row.

One test is then applied to each row, and it is the same test every time. Is what is printed factually wrong? Not is it unfair, not is it unwelcome, not does it look bad. Wrong. An account nobody in the household opened is wrong. A limit printed below the contracted limit is wrong. A month marked late where the payment arrived on its date is wrong. A month marked late where the payment genuinely was late is not wrong, and it does not go on the sheet, however much a household might wish it would.

Whether an entry is raised is a fixed question about fact rather than a judgement about how bad the entry looks. Step eight is therefore something a household can do without any professional in the room. Three findings that resemble each other in no way at all answer the same question the same way, and so they go the same way.

A row that passes the test is raised as a disputeThe process by which a household tells the company holding its record that a printed entry is factually wrong and asks for it to be examined. with the company holding the record, in writing, with the evidence attached. And do the second half at the same time: ask the lender that reported the entry for its own record of the same item. The report is a copy of what a lender sent. If the two disagree, the disagreement is the thing being fixed, and having both in hand is what shortens everything that follows.

What does the whole reading actually take?

The question decides whether anybody ever does the reading at all, and it deserves an honest answer. The first reading takes an evening. Not a weekend, not a project, an evening: the report, a sheet of paper, a pen, and the drawer where the household keeps its papers.

Most of that evening goes on step three. Copying every account onto one sheet is slow the first time, and step three is where the household finds itself hunting for a document nobody has seen in two years. Step four carries the most information per minute, and it is rightly the second longest. Steps five, six and seven together take about a quarter of an hour. Step eight takes as long as the findings need, and for most households there are no findings and it takes no time at all.

The sheet from the first reading already exists by the time of the second, so the second reading is a comparison rather than a construction and takes a fraction of the time. That is the real argument for doing the first one properly. The first reading is not only a reading of a report. The first reading builds the sheet that makes every future reading quick.

How often is this worth doing, and which two events bring it forward?

There is a rhythm and there are two interruptions. The rhythm is once a year, pinned to something a household already remembers. Pinning it that way keeps it from being a decision anybody has to make. The end of a financial year works because the papers are out anyway. So does a birthday. The rhythm has to repeat without needing to be remembered.

The two interruptions override the rhythm entirely. The reading is brought forward before any application for credit, and after anything unexpected, and neither of those waits for the calendar.

Before an application, the record stops being background and starts deciding something, and the application is the last moment at which a wrong entry can be found before somebody else reads it. After anything unexpected, a refusal nobody can explain or a movement in a number nobody can account for is the record trying to say something. The report is where it is written down.

What did the Bhosale household's report say, read in this order?

Meghna Bhosale obtained the report in the week after 31 March of year two, from one credit information company, and asked for the full report rather than the number. Ashok Bhosale sat with her and the folder of papers. The reading took an evening.

The reading only means something against the year, so set the year in front of you first. The lane outside Ashok Bhosale's tailoring counter was dug up for drainage work and stayed dug up for five months. The counter took Rs 52,800/- across year two against Rs 96,000/- the year before. Meghna Bhosale's salary did not move. Nothing about how the household spends changed. The year ran a shortfall of Rs 20,640/-, and no decision anybody took produced it.

Take step three first. The Rs 15,000/- owed to Ashok Bhosale's brother appears on no report anywhere, so the report's list came to three accounts and the household's own list came to four. The three that were printed carried Rs 48,594/- on the card, Rs 8,000/- on the plan and nil on the loan. The printed accounts hold Rs 56,594/- of the Rs 71,594/- the household actually owes, or 79.0 per cent of it.

Now step four, done properly. The loan's grid runs thirty months end to end, of which ten fall inside year two, April to January, each instalment of Rs 3,150/- arriving on the day it fell due, and the thirtieth closing the loan on schedule in January. The card's grid runs all twelve months clean: cleared in full from April to August, and from September onwards the minimum paid in full on its date in every one of the seven months the card carried a balance. The plan's grid begins in January when the plan opened, is clean in January, shows an amount 40 days past its date in February, and is clean again in March.

Read across the plan's own row, the late month has a clean month before it and a clean month after it. One late month between two clean months is a completely different position from three late months in a row, and the difference is invisible to anybody reading down a single column. Twenty five monthly entries exist across the three accounts. Twenty four of them are clean.

Step five: Rs 60,000/- printed and Rs 60,000/- contracted, against a balance of Rs 48,594/-. Step six: every enquiry had a tick beside it. Step seven: the card is the oldest line, and the record runs about three years. Three years is short.

And step eight found nothing. Not one entry on the report was factually wrong. The card balance of Rs 48,594/- was the card balance, the late month was genuinely late, the limit of Rs 60,000/- was the limit, and the address was the address.

A household that expects to find a scandal will count a clean report as a wasted evening. Nothing being wrong is the ordinary outcome of a careful reading, and it is worth saying out loud. The evening was not wasted. Before it, the Bhosale household could have said roughly what it owed and nothing at all about what was written about it. After it, one sheet of paper carried every account, every limit, every grid entry and the date of the oldest line, and the household knew that the thing lenders read said what it thought it said. The certainty is the whole return, and it is a real one.

The Bhosale household, Meghna Bhosale, Ashok Bhosale, Ira Bhosale and Sahyadri Freight Services Private Limited are invented.
Educational material. Not advice on any investment, tax, budget or market position.