If you’ve ever applied for a loan or a credit card, you’ve probably come across the terms credit score and credit report.
But have you ever wondered how these two are different from each other? You may also have heard of what is called a credit report, which is sometimes loosely used to describe your credit report, but they are not quite the same.
What is the difference between your credit score and your credit report?
Your credit score is a number that indicates your creditworthiness with lenders. Depending on the credit reporting agency you go through, your credit score can range from zero to 1200. The higher your credit score, the less likely you are to default on a loan according to lenders, and they are likely to offer you better rates or offers compared to other borrowers.
To calculate your credit score, each of the three credit reporting agencies (Equifax, Experian, and Illion) uses information from your credit file, which lists your personal information and financial history. However, each credit reporting agency uses a slightly different algorithm to calculate your score. Therefore, your credit score may vary depending on the credit reporting agency you check with.
The information on your credit report is based on information available from various lenders, utility providers and telecommunications companies with whom you have contracted. Besides your financial behavior, your credit report also lists public record information, such as court decisions against you.
Here are some examples of the type of information that appears on your credit report:
- Your personal information, including your name, date of birth and address.
- Details of credit accounts you hold, including provider name, account type and your credit limits.
- Overdue Accounts.
- Your repayment history, such as whether you meet your repayments on time and any missed or late payments.
- All credit applications you have made, including the type and amount of loan you applied for.
As you can see, your credit report lists both positive and negative information. Positive news refers to positive financial behaviors, such as paying bills on time, taking out loans, and reducing credit card limits. Negative information can include defaulting on payments, applying for multiple credit products within a short period of time, and paying your bills late.
Before the introduction of comprehensive credit reports, only negative information was included in a person’s credit report. Having positive and negative information allows credit bureaus to comprehensively assess a person’s credit situation. When it comes to your credit score, a series of positive actions can help build your credit score. Even if you’ve defaulted in the past and your credit score isn’t as good as it should be, positive financial behavior like paying your bills on time can help boost your credit score and improve your chances of getting credit in the future. .
You can find out your credit status by regularly checking your credit score and credit report. You can check your credit score as often as you want, but ideally on a platform that doesn’t charge you for the service and only performs a soft credit check. With Ratecity, Australians can obtain their Experian and Equifax credit scores at no additional cost without negatively affecting their rating.
It is also recommended that you obtain a free copy of your credit report from each of the credit bureaus at least once a year. However, if you plan to order a copy of your credit report more than once a year, that credit bureau may charge you a fee.
What is the difference between a credit report and a credit report?
Information on your credit report comes from your credit report, which is basically a collection of raw information about your personal and financial information obtained from various banks and credit providers. If you have ever applied for a credit card or loan, or have a phone connection in your name, there is likely a credit file or database of your information maintained by credit reporting agencies.
However, whenever a lender or credit grantor extracts your credit information, instead of providing them with a jumble of raw data, the credit reporting agencies provide them with a neat credit report, which is nothing other than an organized presentation of your credit file data.
You might think of your credit report as a condensed version of your credit report, listing specific information that lenders can use to assess your financial behavior. This means that anything on your credit report does not appear on your credit report.
For example, most late payments shouldn’t show up on your credit report if they’re more than seven years old. Similarly, credit applications you made a few years ago should not show up on your credit report. It is thus possible to increase your credit score and get rid of black spots on your credit report thanks to a consistently positive financial behavior.
Is it possible that I don’t have a credit report?
If you have never used any form of credit or have had very few credit accounts, there may not be enough information about your financial history. This is known as having a thin credit history or no credit history, as is common for many young Australians.
When you apply for credit with a thin credit history, your credit report will contain virtually no information, resulting in a low or no credit score. A low credit score can prevent you from qualifying for various credit products, like a home loan or a credit card, or you could find yourself paying more than others.
If your credit report is thin, you can try some of these tips to establish a healthy credit history:
- Postpaid phone plan – One of the easiest ways to boost your credit is to sign up for a postpaid phone plan. Postpaid phone plans are considered credit accounts and are recorded on your credit file. They are also one of the most accessible products to apply for to start building your credit, compared to a car loan or mortgage.
- Join your household utility account – You can also arrange to have a regular cleaning bill in your name, such as energy, water or broadband. If you still live with your parents, you may want to ask them to add your name to the family account to help build your credit history. However, remember to pay your bills on time to establish your credit score. If you forget to pay on time, it could result in negative information being put on your file.
- Build a savings nest egg – If you’re a regular saver with a large nest egg, this can give card providers the impression that you’re in charge of your finances, increasing your chances of credit card approval. Consider automating direct deposits into your savings on a weekly or monthly basis to ensure you are tracking your savings goals.
- Joint applications – If your partner’s credit score is better than yours, you may consider applying for a joint credit card to improve your chances of being approved. When you jointly apply for a credit card, the credit grantor will assess both applicants together, which means a great credit score can offset a lower score. However, there are only a handful of banks that allow you to apply for a joint credit card with a partner or other family member, which may limit your options. Another disadvantage of this arrangement is the shared debt. Sharing a credit card with your partner means you are both responsible for each other’s debt. If either partner overspends or is unable to repay their share of the debt, it will have financial and relationship consequences for both partners.