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How to Read Your Credit Report

My name is Gumshoe. John Q. Gumshoe. Maybe you’ve heard of me, maybe not. Chances are you’ll need my help at some point. In 2020 alone, there were 1,387,615 reported cases of identity theft in the United States.1

I'm a private investigator, see. A credit investigator, to be exact. My specialty? Identity theft, the perfect marriage of crime and craftiness, forged in the mean streets and back alleys of the internet. That brings us to my current case, Bob McNally. Click "Case Study" above to read the setup.

Bob McNally's Credit Conundrum

The vic, Bob McNally, has lived a long and successful life. Like many wealthy people, he hadn’t paid attention to his credit score. Why would he? Bob has always paid his bills on time, never had any major financial issues, and used his lines of credit sparingly. Nothing to worry about... or so he thought.

It wasn’t until he tried to lease a sporty set of wheels for his kid that Bob smelled something fishy. You see, his lease application had been rejected. That's when he came to me. He needed my help and I knew exactly where to start: The Credit Report.

1. FTC.gov, 2021

There are 5 sections on a standard credit report, but 3 of them matter most when it comes to credit fraud:

• PERSONAL INFORMATION

• ACCOUNT INFORMATION

• HARD & SOFT INQUIRIES

This section of a credit report lists basic personal information, like this:

Name: Bob McNally, Sr.
Social Security number: xxx-xx-1203
Birth date: 11-23-1956
Address: 125 Credit Fraud Dr, Anywhere, USA
Phone number: (561) 555-1212

There’s only one problem here: that's not Bob’s address.

This could be a simple mistake, but I smell a rat. Luckily, Bob can file a dispute with the reporting credit bureau. Because this info is gathered from multiple sources—like the bank or utilities—it can have typos or mistakes which may lead to fragmented credit history. This rarely has a negative impact on the credit score, but sometimes it can be an early indicator of identity theft.

A credit report contains information useful to impostors and investigators alike, but the Account Information section is where identity theft can start to become obvious. Here is where I can see all the dates Bob’s accounts were opened or closed, his payment history, credit use, account balances, and the status of any loan payments.

Bob’s account info looks to be in good order, with one exception: one of these accounts was recently opened, but is listed as "In Collections."

Knowing Bob’s financial and credit history, I’d say this is more of a red flag than a red herring.

This is often the most important section of a credit report. Hard and soft inquiries are generated whenever an authorized person or institution requests someone’s credit report.

Soft inquiries are those NOT generated by a prospective lender. This includes when you pull your own credit report, credit checks made by banks, or credit card companies offering you goods or services (besides a line of credit). Most importantly, soft inquiries don’t impact your credit rating.

Hard Inquiries, though, are a different story altogether.

Hard inquiries are made by a potential lender for the purpose of reviewing your history. This is usually because you've applied for a new line of credit, auto loan, or mortgage. Hard inquiries can negatively affect your credit scores, but that’s not the only reason to watch this section closely.2

An unexpected hard inquiry is a sign someone may have applied for a line of credit in your name.

2. TheBalance.com, 2021

So let’s review the facts, and just the facts. We have an incorrect address, a suspicious new account that Bob doesn’t recognize, and most concerning, a hard inquiry from a bank he hasn’t ever heard of. It’s pretty clear to me that Bob’s fallen prey to an impostor, a fraudster, the lowest of the low: an identity thief.

Many people like Bob underestimate the importance of reading their own credit report. But sometimes, tracking your credit is about protecting your identity, your investments, and your future. Luckily for Bob, he caught on before his financial reputation was tarnished forever.

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