When it comes to a credit report, everything is revealed (or it’s supposed to be).

You’ll see a list of your charge accounts, how much you owe on them and if you’ve been late paying your bills each month. You’ll see tax liens, mechanics liens that have been filed against your home, court judgments, and public records (including bankruptcies). You might also find mistakes.

Finally, your credit history includes a list of everyone who has requested a copy of your credit history in the past 6 months to a year. Why? If you apply for credit in a bunch of places at the same time, creditors get nervous that you’re about to draw down on all of your available credit at exactly the same moment.

How much might that be? Open your wallet and take a look at how many credit cards you have. You might have a gas card or two (say, Amoco, Mobil Oil, or Shell), several credit cards (American Express, Master Card, Visa, Discover — or perhaps two Visas from different banks) and a department store charge account.

If you add it up, you might easily have $25,000 to $100,000 in available credit! There’s no trick to racking up the credit cards. Most of us are showered with several offers of credit each week. One woman kept track and reported that over a year, she and her family received offers for more than $1 million in credit!

Reading a typical credit report can be tough, particularly if you’ve got a slew of “negatives,” industry jargon for the problems that show up on your account (like a history of late payments or a past bankruptcy). But if you look at it for awhile, you’ll begin to pick out various pieces of information.

The Nuts & Bolts

What does a credit report contain? All kinds of information related to the different accounts you own, how much you owe on them, and whether or not you pay on time.

Credit reports detail the creditor name and account number, the date of the most recent information on the account, the date the account was opened, the credit limit, how much is owed and how much is past due, the minimum amount due each month, how many months you’ve had the account or owed a balance, how many times you’ve been 30, 60, or 90 days late in paying, and your current credit rating on a particular account.

It is possible to maintain good credit, even while owing a huge amount of money. The way you do this is by making all of your payments on time, even if you can’t make them in full. Also, don’t charge each line of credit to its maximum amount. Limit the amount of inquiries of your credit history. Too many inquiries in too short a period of time can have a dramatically negative impact on your credit history.

PERSONAL FINANCE TIP: If you don’t understand your credit report (not too tough to imagine, given how they look), you’ll want to find someone who can explain what the report says. Your accountant or tax planner might be able to help, as might a mortgage lender. You can also make an appointment with a non-profit credit counseling agency, like the Consumer Credit Counseling Service, which offers free or very low cost help (as little as $9 per month) to those individuals who are in over their head financially.

The Bottom Line

If you’ve got problems on your credit report, chances are they’re one of these: Debt. Revolving or installment, you owe money. Debt stays on your credit report until you’ve paid it off. Then, it’s noted as a paid off debt.

  • Late payments. You’ve missed paying your Visa bill and the next one appears with a past-due notice and a finance charge. You then send in your check. That’s a late payment, and a history of chronic late payments concerns lenders. Late payments usually disappear from your credit history two years after they occur. You can make a late payment less important, however, by paying all of your bills on time and having a good explanation as to why you were late paying previous bills.

  • Bankruptcy. Having a judge wipe your financial slate clean with the discharge of the bankruptcy sounds like an easy way to start all over again. It isn’t. If negative information is a gray stain, bankruptcy is a big black mark on your credit. Even after the bankruptcy has been discharged, it stays on your credit report for up to 10 years.

  • Errors. Because of the sheer volume of information being sent to credit reporting agencies, errors occur with alarming frequency. But if you don’t fix the errors, they’ll come back to haunt you in the form of denied credit.

  • Repossessions. If you buy furniture, jewelry, or appliances on the installment plan and fail to make a payment or two, these items can be taken back (repossessed) by the creditor until you ante up what you owe.

  • Accounts turned over to a collection agency. If you fail to pay your bills and the creditor hires a collection agency to chase you down, that will get noted on your credit history.

  • Charge-offs. If, after turning over your account to a collection agency, a creditor finally gives up on you, it will typically write off your debt as a bad loan. This is called a charge-off, and it will appear on your credit report.

  • Foreclosures. If you own a home and fail to make your monthly mortgage payments, the lender will begin foreclosure proceedings to take back the house (a form of a repossession).

  • Tax liens. If you owe the IRS, every creditor will know when they print out a copy of your credit report. Tax liens stay on your credit report until you’ve paid them, and will be noted as paid off for several years after that.

  • Too many credit inquiries. It’s perfectly normal to have a couple of inquiries, but 25 of them within three weeks will turn a few heads and possibly get you rejected by a future creditor. Credit inquiries stay on your credit report for 2 years, but creditors are particularly interested in the past 6 months.

  • Too much available credit. Even if you owe nothing, you could get rejected for a loan if you have too much available credit. This is one of the easiest items to fix on your credit report.

If you want to get a loan at the best possible terms, you’ll need to spend the time it takes to fix your credit.

Oct. 17, 2003.