Are you taking steps to improve your credit score?
Improving it can increase your chances of getting approved for more favorable loan terms. With this, you can also get lower interest rates and higher credit limits.
But you may be doing more harm than good if you’re not well informed. You need to understand the difference between a credit report and a credit score.
Read on for the credit report vs credit score differences that you should know about.
What is a Credit Report?
There are many different types of information included in a credit report. The first item generally found in a credit report is identification information. This includes items such as your name, address, date of birth, and Social Security number.
Another item that is often included in a credit report is employment information. This can include your current employer, your previous employer, and your job title.
Your credit history information is also found in your credit report. These can include your credit accounts, your payment history, and your credit score.
Your credit report will also include your public record information. These include information such as bankruptcies, foreclosures, and tax liens.
How Do Credit Reporting Agencies Collect Information?
Credit reporting agencies, or credit bureaus, collect information from a variety of sources. This includes information from your credit applications, your creditors, and public records. The information is then used to create your credit report.
How Can I Get a Copy of My Credit Report?
There are a few ways that you can get a copy of your report. You can request a copy from the major credit reporting agencies at AnnualCreditReport.com. These are the Equifax, Experian, and TransUnion.
You’ll need to provide some basic personal information before you can get a copy. These include your name, address, date of birth, and Social Security number. Or, you can buy a copy of your credit report from any of the credit reporting agencies.
What is a Credit Score?
A credit score represents the creditworthiness of an individual. It is a numerical presentation based on the level of one’s credit line.
A credit score is primarily based on credit report information sourced from credit bureaus.
The most important element in a credit score is payment history which makes up 35% of the score.
Credit use, which is the second most important element, makes up 30% of the score. Length of credit history accounts for 15% while new credit and credit mix make up the remaining 20%.
How is Your Credit Score Determined?
Credit scores get determined by a variety of different factors. The most important factor is your payment history. This includes whether you make your payments on time, and how often you pay your bills.
Other factors that can affect your credit score include the amount of debt you have and the length of your credit history. The types of credit you have can also affect your credit score.
What is the Credit Score Range?
There are three credit score ranges: Excellent, Good, and Poor. Each range gets determined by the credit score range.
Excellent credit scores are 720 and above. Good credit scores are 660-719. Poor credit scores are 300-659.
Credit scores get calculated based on several factors. These include credit history, length of credit history, types of credit used, and current levels of debt.
The higher the credit score, the lower the risk for the lender. If the risk is lore, it will be more likely for the borrower to qualify for loans and favorable terms.
The Importance of a Good Credit Score
A good credit score is important for many reasons. A bad credit score can lead to higher interest rates on loans and lines of credit, and can even prevent you from getting a loan at all. In cases like this, it would be better to get poor credit loans instead.
A good credit score can save you money on interest and help you get approved for loans and lines of credit. It can also help you rent an apartment, get a cell phone plan, and even get a job.
Credit Report vs Credit Score: The Differences
Credit reports and credit scores are somewhat related. But, they are not the same thing.
Your credit report is a record of your credit history. Meanwhile, your credit score is a number that lenders use to check your creditworthiness.
Credit reports and credit scores can both help you get approved for a loan, but they serve different purposes. Your credit report gives lenders a detailed look at your credit history. Meanwhile, your credit score helps them determine whether you’re a good candidate for a loan.
How Are Credit Reports and Credit Scores Used Differently
There are a few key ways that credit reports and credit scores get used differently. For one, credit reports give a more holistic overview of someone’s credit history. Credit scores are primarily used to predict future creditworthiness.
Also, credit reports are often used by landlords and employers to screen applicants. Lenders use credit scores to determine loan approval and interest rates.
Credit reports are generally only seen by those with a direct need to view them. While credit scores are often sold to businesses and used for marketing purposes.
How to Get Your Credit Report and Credit Score
You can get your credit report for free once a year at AnnualCreditReport.com. Your credit score is not included in these reports. But, you can get your credit score from some credit cards and credit scoring services.
To get your credit score, you’ll have to pay a fee. Various credit scoring services offer credit scores for a fee. Some credit cards give you your credit score as part of your monthly statement. Some provide it as part of your credit card rewards program.
Why Knowing the Difference is Important
If you’re trying to improve your credit, it’s important to understand the main credit report vs credit score differences. Knowing what’s on your credit report and what factors influence your credit score can help you take the necessary steps to improve your credit.
For more helpful articles on improving your credit scores, visit the rest of our blog.
