Things to Know About Credit Score and Credit Report
Things to Know About Credit Score and Credit Report
When was the first time you became familiar with the terms credit score and credit report? For some, it could be when you first applied for a loan or a credit card, for some it could be when you started learning about banking and finance and for some it could still be an unknown subject to comprehend. Not to worry, this article could be an eye-opener to dispel all your doubts about credit score and credit report.
Things to Know About Credit Score and Credit Report
When was the first time you became familiar with the terms
credit score and credit report? For some, it could be when you first applied
for a loan or a credit card, for some it could be when you started learning
about banking and finance and for some it could still be an unknown subject to
comprehend. Not to worry, this article could be an eye-opener to dispel all
your doubts about credit score and credit report.
What is a Credit Score?
To put it simply, a credit score is a numerical expression of
your creditworthiness. The score is a result of your credit behaviour and a
proof to the lenders how well you have managed your finance on your own.
To dig deeper on how this mysterious number is arrived at, we
must know that credit score is generated by credit bureaus who hold the record
of your credit activities and calculate the score based on parameters that are
widely accepted.
What is a Credit Report?
After taking a loan or a credit card, you inevitably will
form a financial relationship with your lender. Your credit activities with the
bank is reported to the credit bureaus by your lender periodically. The bureaus
who collect the data maintain a detailed report based on the information
provided. This is called credit report.
Your credit report will contain your personal information,
contact details, history of borrowings, payments, type of accounts you
maintain, defaults, settlements, negative accounts, closed accounts etc.
Why is it important to have a good credit score?
A good credit score is a result of good credit behaviour and
with that the lenders are assured of your trustworthiness and reliability. As a
benefit, you can get the best loan offer with low interest rates and flexible
repayment options. Even a small percentage of reduction on the loan is hugely
helpful in the long run and considerably lower your outgo on EMIs.
With a good credit score, you have the power to negotiate
with the lender to get better terms. On contrary, with a low score, you are
bound to accept the terms determined by the bank which could even become a
financial burden when it comes to repaying the loan. Moreover, with the bad
credit, the loan and credit card applications can even be rejected.
Credit Score Vs Credit Report
As a score can only be a number, a credit score is a
three-digit number that ranges between 300 to 900. On the other hand, a credit
report is a detailed report that holds the information of your credit
activities. Details such as credit card payments, loan accounts and its status
are mentioned in a credit report.
A credit score is calculated based on your financial
activities and it is important to know what could harm your credit score if not
managed efficiently. In a credit report, credit history is an important factor
that has a significant weightage on your credit score. If you have a bad credit
history, your score is likely to get affected.
Both credit score and credit report are provided by four
credit bureaus. In addition to that, there are financial services company like
CreditMantri who provides credit score for free.
End Note
Both credit score and credit report are co-related as the
credit score is derived based on your credit report. It is simple that a good
credit report yields good credit score.
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Tags Credit Score, Credit Report