If you’re old enough to have established credit, or if you are just starting out trying to establish your credit, it’s a good thing to know the difference between your credit score and your report. These are two separate things that affect your financial health.
If you ever want to get a loan, apply for a credit card or even land some jobs, you need to be aware of your overall financial health, and your credit score and your credit history are two important tools you can use. But, again, they are not the same thing and you should refer to them for different reasons. Here’s a quick breakdown of the difference between credit reports and credit scores.
Credit Score
Your credit score is the numeric representation of your overall financial health, You can quickly refer to it to get an idea of your “bendability” for financial institutions: the higher the score is, the more likely you will be to get approved and have better interest rates.
You can kind of think of your credit score as your grade point average: it reflects the reports of the three major credit reporting companies and gives lenders a quick and easy way to determine how fit you are to pay back any loans to may take out.
You score typically ranges from 300 to 850, with 850 being a perfect score. Where you fall in this range will determine whether or not you get approved for loans. Your score is adjusted to reflect your credit history, so it can rise or fall depending on what you do with your finances.
Credit Report
If your credit score is your GPA, then your credit report is your report card, listing all of the things that you have done in your financial life that affects your score.
Your report — which you are entitled to free once every 12 months — will list all outstanding debts and paid debts so you can see exactly what’s hurting or helping your score. This allows you to be able to take care of any debts that are lowering your score.
What Affects Your Score?
Many things can affect your credit score, both positively and negatively. It’s up to you to have good financial practices so you can keep your score high enough to be approved for loans.
Late payments are one of the biggest negative impacts on your history, followed by defaulted loans and too much debt to income. Each of these can be fixed in time, allowing you to raise your score and to get approved for any loans you may need. It will take time, but if you stick with it, you’ll see your score rise year by year.
Lenders may check one or the other or both, so make sure you always stay on top of them both. To start increasing your score, you can get a credit with no annual fee when you visit SecuredCredit.Cards to apply.
Nicole Humphries works in personal finance and enjoys writing articles on this subject to share her knowledge, and help people who have questions or may be struggling financially.
