You’d be forgiven for thinking that these were one of the same. Although they’re interchangeable and both are very important, they can provide different insights on how you’ve handled credit in the past. Both your credit report and credit score can impact how much credit you can access along with the price you will receive credit at.
What’s on your credit report?
Your credit report contains all of your personal details such as name, date of birth, address history and employment history. It will list all credit enquiries made over a specific time such as mortgage applications, credit cards, personal loans and telecommunications, usually over the last five years.
If you have any late or missed payments or even a dispute with a utility provider, that provider in most cases will report this to credit agencies, who will then mark your file. The credit report will detail any overdue debts, defaults and bankruptcies you may have. These details are listed on your report for five years in most cases.
The report will also include any directorships you may be part of like a business you have registered or a family trust. This can result in the financial institution requesting financial documents for that entity too.
What is a credit score?
Your credit score comes as a number, the number differs from one credit agency to another. For example, your score with Veda would be from 0 to 1200 (1200 being the highest).
The score can be deemed on your current circumstances such as age, length of employment and time at your current address. Negative information such as defaults, bankruptcies and court judgements can lower your score significantly.
The lower your score, the higher the risk for the institution and in turn, you will either be declined for credit or given a higher interest rate at the very best.
Who uses this information?
Most, if not all institutions, who are to provide credit or a service will carry out a credit check prior to providing credit. These include home loan lenders, credit card providers and those offering personal and car loans, as well as telcos and utility companies.
How you can improve your score
Credit health checks are important, especially if you are planning to obtain credit – whether it’s requiring a credit card or buying a home. Checking your credit report will also allow you to see if you have been a victim of identity theft. You can access your credit report and credit score from numerous credit rating agencies such as Veda, Dun and Bradstreet and Experian.
You can challenge impairments you have noted on your file with the provider should they be incorrect, however you will need to have a good audit of events along with proof.
Having an active credit account improves your credit report/score. This allows lenders to see how responsible you are with obtaining credit along with keeping payments up to date. Having a mobile phone plan, internet or even utility bills in your name can improve your score, and making sure your payments are always up to date is an absolute must!
Keeping your credit enquiries to a minimum can help with your score. Every time you apply for credit, you create a footprint on your credit report. Lenders start getting nervous when they see multiple enquiries when seeing enquiries for the same type of credit, especially in a short space of time.
If you would like to get further information regarding your credit score or your credit report, get in touch with the likes of the credit agencies listed above. If you have defaults on your credit file and are in need of obtaining credit, get in touch with your local mortgage professional, as they may still be able to help.
________________________________________________________________ Raj Ladher is a local expert on mortgages and financial matters. Originally from the UK, his consultancy firm is now based in Sydney.