9 September 2016 10:02 am / Road Trip Drivers Buy a Car Finance a Car

Credit Score vs. Credit Report: What You Need to Know

Ah, being an adult. It confuses us, saddens us, and frustrates us: why did we think being one would be so good?

Between trying to stay on top of your bills, 9-5’s to work, paying your taxes, and maintaining an above average credit score, it’s less doing whatever we want and staying up as late as we want and more trying not to pull out our arm hair in frustration, especially when it comes to deciphering the metrics of your debt.

Potato, Po-tah-toe. Tomato, Tom-ah-to. Credit Score and Credit Report. What is the difference? Although they measure similar things, theirs is a big different between the two. They can be confusing. Just take our hand. We’ll break it down for you.



A credit score is a number (ranging from 300-900) that you receive for all the financial actions you have taken as an independent adult (look at you go!). Essentially, the number is the result of a complicated algorithm that credit bureaus apply to all the available financial institutions. It can be thought of as the sum of everything stated in your credit report. It helps lenders and banks determine if you are a suitable candidate for things such as home and auto loans.

A FICO score is used most widely by creditors, with a score of over 700 being good. Your score gives lenders an idea of how big of a financial risk you’d be as a potential loaner. A higher score helps indicate that you would make your payments on time, and not default on loans. The FICO score is roughly broken down by a few major factors, such as the amount of debt you currently owe (accounting for 30% of your score), the length of your credit history (young people tend to have lower or no existing credit score) (15% of your score), credit mix (the types of different credit accounts you own) (10%), and new credit (10%).

Depending on your account activity, your score can fluctuate over time. Scores that are above a 720 are considered excellent, and scores above 690 are deemed good. Anything below 600 is considered poor, and if you have no little to no credit history, your score will likely be bad.

A credit report is a document containing your credit history, such as your bill payments. It also has general information such as your name, address, and social security number, and credit-related information such as the types of credit you use, any outstanding loans or lines of credit, the balance and limit on your credit cards, and the amount of credit you’ve opened recently. As well, your report will have information on whether or not you have made payments on time in the past. These will include your cell and utility bills, as well any rent or mortgages you may pay. If you have had any accounts go to a collection agency in recent years, that will also be on your report.

Like your credit score, if you don’t have credit, your report is going to be sparse as well, which potential lenders don’t like to see. It’s important to establish credit, as lenders, landlords, insurers, and employers use credit reports to evaluate your history and determine an applicants’ eligibility for everything from loans, credit cards, rentals, insurance policies, and jobs.

You’re entitled to check your credit report for free once a year, via AnnualCreditReport.com to keep up to date and to make sure that all the information printed on there is accurate.

At BC Drive, your credit score is like your age: just a number. We work with all credit standing: good, poor, bad, or none. Don't let your credit history stand in the way of letting you drive. See how we can help you get back on the road today.

 

 

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