Credit, credit, credit. We hear this word all the time, but what does it actually entail? Your credit report and score are key factors in major life decisions, so it is important to understand what they mean.
Credit Report vs. Credit Score
Credit Report: Your credit report is a record of your credit payment history, and it includes your identifying information, account history, public records and any inquires. Here is a breakdown of the report:
- Identifying information (name, date of birth, address, etc.)
- Account history (issuer, date opened, credit limit, balance, payment history, etc.)
- Public records (tax liens, bankruptcy records, etc.)
- Inquires (record of businesses/lenders that have reviewed your credit history; stay on your record for two years)
Credit Score: Your credit score is a number that reflects the likelihood of you paying back any debt that you owe. It is calculated from your credit history and how you manage your current debt. The credit score range is 300-850, with 850 being the best and you want to aim for your score to be at least 620 or above.
Reviewing Your Credit Report
Reviewing your credit report on a regular basis is a smart financial decision. After all, the information contained in these reports is the same information that banks and lenders use when determining whether you qualify for loans and at what interest rates. Make sure to always check for errors, as removing errors has a positive impact on your score.
How to Improve Your Credit
Here are 10 tips to remember that can help improve your credit if you find that your score is towards the lower portion of the range. Make sure to:
- Make all monthly payments
- Make all payments on time
- Keep a close eye on your credit report
- Avoid closing old lines of credit
- Increase your line of credit cautiously
- Open new credit lines wisely
- Save your money so you have an emergency fund
- Maintain low balances
- Beware of credit-repair scams
- Take advantage of other resources, such as major credit bureaus’ websites.
For more information on these tips, click here.
Credit is important and affects all aspects of life! For more resources, visit the credit page of our financial advice site.
Reviewed December 2022
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.