Whether you are aware or not, your credit score affects your financial life. The first step to improving your credit score is understanding your credit report.
Credit Report v Credit Score
While your credit report and credit score both provide an insight into how you have handled credit in the past, there are differences between the two terms.
What is a credit report?
Think of your credit report as a record of your credit history. One can basically compare your credit report to the report card you received in school; instead of information about your academic performance, it contains information about how you have borrowed money and paid it back.
What is in your credit report?
Your credit report is divided into three sections:
- Personal Information
This section contains your name, date of birth, address, contact information, and employment history.
- Credit Obligations History
This section lists all your credit obligations.
It will list all your credit cards, store cards, vehicle finance as well as short-term loans and long-term loans – i.e. home loan.
It may include less obvious information such as utilities providers, internet service providers, cell phone networks, DSTV, ect.
- Payment History
This section of your credit report will show your history of repayment – i.e. whether you’ve paid your creditors on time each month, made a late payment, or even missed a payment.
What is not included in your credit report?
Your credit report will not include the following information:
- Salary (creditors may ask for this info during the application process to access your affordability)
- Sexual orientation
- Criminal records
- Student loans
What is a credit score?
If your credit report is compared to your school report, think of your credit score like your overall result or percentage. Your credit score sums up how likely you are to be approved for credit. While your credit report is a detailed record of all your financial behaviour, a credit score is a number which sums up the info in your credit report.
What is a “good” credit score?
Generally, the higher your credit score is, the better. Having a high credit score demonstrates to lenders that you are reliable and responsible; this increases the likelihood that your application for credit will be approved.
Remember: your credit score doesn’t guarantee that you’ll be approved for credit or offered the lowest interest rates. This is because a creditor’s decision is not based solely on your score. For example, creditors also take into consideration the information you provided in your application, their past relationship with you, and other factors like your income and living expenses are important too.
What is the meaning of each score:
Very High Risk (500-594):
– A person already has accounts in arrears and judgments has been granted
High Risk (595-610):
– A person has accounts which are in arrears and company have tracers in the process of proceeding with
Average Risk (611-628):
– Does not pay accounts frequently.
Low Risk (629-659):
– Accounts are up to date, but has high risk loans or various inquiries by credit providers.
Minimum Risk (660-750):
– Accounts are up to date
– The person has no outstanding accounts listed
Other Factors that might Influence your Credit Score:
- Frequently changing of Home address;
- Telephone numbers and;
Your credit report is a record of your borrowing history. It includes your personal details and list of your previous and current debts. It also keeps records of your repayment history – whether you’ve always paid your debts on time or missed payments.
Your credit score is a 3-digit-number which summarizes the information in your credit report. The higher the number, the more reliable you are viewed by creditors. A lower number may make it more difficult for you to obtain credit.
Your credit score does not guarantee that your application for credit will be successful.
For professional advice regarding your finances or to obtain your FREE Credit Report, please do not hesitate to contact Help-U Debt Counsellors & Administrators on (051) 448 8462 or firstname.lastname@example.org