Remember how teachers used to hold the threat of a file that would follow us around for the rest of our lives over us as a disciplinary measure?

“Just so you know, this is going on your permanent record!”

It didn’t take long for most of us to realize those were idle threats.

However, it turns out there is a permanent record which we should be concerned about. It has the power to determine the quality of life we enjoy; which is why it’s important to know what to look for on your credit report and how to understand it.

The good news is the law mandates you’re entitled to receive a free copy of your report on an annual basis. This is a service of which you should definitely take advantage, as it is your best insurance against discrepancies. Here’s what to look for:

Personal Information

This is where you can ensure it really is your report. Lots of people have similar names; some even have similar Social Security numbers (SSNs).

It’s easier than you might think for information to get crossed up. Make sure the name, address, SSN, date of birth and phone number match yours exactly.

You should also make sure all of the listed addresses match your residence history.

Inquiries

Entries are made in this section whenever someone requests a review of your credit report. Such inquiries fall into one of two categories—soft and hard.

Soft inquiries occur when you ask to see your own report. They are also logged when advertisers looking to send you promotional materials or creditors with whom you have open accounts review your report.

These requests do not affect your credit score.

Hard inquiries are recorded when you apply for financing of any sort—whether a mortgage, car loan, credit card or charge cards. This can even include no credit history car loans—as those lenders will also review report just the same.

Each of these will diminish your score—except a cluster of them all occurring within a short period of time from a specific type of lender—or for one specific purpose.

Reporting agencies assume you’re shopping for the best terms on a loan in those instances and consider them one inquiry.

Credit History

Verify all listed accounts are yours. Review the status of accounts you share with others such as a former spouse or life partner to be sure they match your understanding of them.

Pay particular attention to total loan amounts, loan balances, notations of late payments and collections activities.

Make sure all the accounts you’ve closed are listed as such and verify all active accounts were opened by you. This is key to spotting identity theft.

Public Records

This section will contain notations when you’ve filed for bankruptcy protection in the past seven years, or if liens or judgments have been filed against you in the last seven to ten years.

Watch out for bankruptcies filed by a former spouse, liens that should have been cleared and lawsuits in which you were not involved.

Inaccuracies in this section, while admittedly rare, can have a profound effect on your creditworthiness. Errors here could also lead to unpleasant financial consequences such as wage garnishment.

An annual review of your credit report is key to ensuring your credit history reflects your actions. There are many ways interlopers can usurp your good name these days and use it to their own ends.

Knowing what to look for on your credit report is one of the keys to protecting your finances!