the difference between credit score and credit report

The Difference Between Credit Report And Credit Score

Can you differentiate the difference between your credit report and a credit score? In early 1980, knowing the difference had no real effect. In today’s society, this is not the case.

Can you differentiate the difference between your credit report and a credit score? In early 1980, knowing the difference had no real effect. In today’s society, this is not the case.  Understanding the difference between your credit file and credit score is essential as it can help you analyse whether or not you will be allowed to borrow money. So are they different? Let’s find out. 

What is the difference between a credit report and credit score?

What is a credit report?

A credit report is simply a report that has information about all your past and existing credit-related history.  Credit reports are usually created by credit bureaus such as Equifax. You can access your credit report online directly from these credit bureaus. When you apply for a loan, a lender or credit may assess the information within your credit report to determine whether or not you are capable of repaying the loan or finance that you have applied for.

What is a credit score

A credit score is the awarded grade or numerical representation of your credit situation. Depending on the credit bureau, a credit score is usually a number that may lie between 0 and 1000. It can be used to determine your creditworthiness to credit organizations, lenders, or even mortgage lenders, among many other things. The higher your credit score, the more likely you are to be perceived as creditworthy.  Whilst this is not the only thing that lenders look for when assessing your file, a strong credit score can significantly help you to secure the credit you seek.

Credit bureaus all use a statistical algorithm to calculate your credit score. This score is influenced by a variety of factors. Understanding these factors is important to ensuring that you keep a clean credit file.

 Credit scores are either good or bad based on the following bands: 

what does your credit score say about you?

What can damage your credit report and credit score?

Payment history

Many people fail to adhere to payment dates given to them by their lenders. What you don’t know is that payment dates of your credit are of great significance in determining your credit score.  Paying your loans late or skipping payment can negatively affect your credit report hence affecting your credit score. You will need to make your credit card payment on time to avoid damaging your credit report as well as your credit score.

Current debts

Your current balance ratio should be relative to your total credit limit. How you’re using your current liabilities is of importance as you should utilize your debts fully regarding not being reliant on non-cash funds.  Having higher balances on all your cards with different companies could be an indicator of higher risk in determining your credit score.

Neglecting your credit report

Don’t forget to check your credit score. Credit reporting agencies such as Experian and Equifax offer you one free report per year. Assess your file to see whether or not you have any defaults, judgments or blackmark. Alternatively, credit repair specialists can quickly assess your file. If you have any negative listings, they can work towards removing them.  

Closure of credit card accounts

Closing of credit cards that still has pending payment balances can significantly affect your credit score. What most people fail to see in doing the closure is that their credit limits will drop to 0 while the balances in it remain intact. It is always right to first pay your balance before you go on closing your credit card. You should also avoid closing old credit cards as this makes your credit history seem shorter, lowering your credit score. Try keeping your older credit cards as you get to lose nothing by continuing to have them.

Repairing your credit history

 You can always restore your credit history to improve your credit report and score as well. However, you will need to know a good credit repair company before you go out to fix your history. You can always get good advice and get to know under which grounds your credit history can be from these companies.

Working towards a great credit history

You should always work towards having a good credit history as this will always improve your credit report as well as your credit score. Problems always come in one way and another and when you can’t avoid them there will always be a solution to them. Remember you can always fix your credit report as there are many credit repairs companies out there, but you will need to go for the best.

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