Your Credit Report is the Basis for Your Credit Score First of all, your credit report is the basis for your credit score. The information contained in your credit report is used to compile your score. If the information in your credit report isn’t very good, your credit score will reflect that.
Yes, it’s important to have a look at your credit score on occasion. However, it’s absolutely vital that you check the information in your credit report. If there is a mistake in your credit report, it can drag down your score, and threaten your ability to get loans and to get good interest rates.
Your Credit Report is More Nuanced While the credit score is easy to understand, and allows lenders an idea of your financial responsibility at a glance, the reality is that it doesn’t offer a truly in-depth picture of your credit habits. The credit report actually provides that. Your credit report includes a monthly look at your payments, as well as information on what debt you have.
It’s also possible for you to have a personal statement about your credit situation included in your credit history. The information in the credit report is more complete and detailed that what is seen by a credit score. Indeed, some lenders look through your credit report thoroughly, no matter what your credit score is, since it gives a more complete picture of what you’re really like with your money.
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Your Credit Report Puts it All Out There Another issue with credit scoring is that there are more than 200 different models out there. Even FICO, which is the most recognized name in credit scoring, offers different versions of its scoring model. Each of the credit bureaus uses a different model to come up with its own score, and many individual lenders have their own credit scoring models. In fact, using the same information from your credit report, it’s possible to see a difference of 30 points or more across different scoring models.
Because there is no standard credit scoring model, it makes sense that lenders want to look at the information in your credit report. The information is all out there, for the lender to see. While the credit bureaus might have slightly different information, depending on what is reported to them, there are fewer differences between what appears on your different credit reports than what ends up influencing your credit score under different models.
Bottom Line It’s nice to know your credit score. And before you make a major purchase with debt, you should have a solid idea of what your score is. However, it’s not something you need to obsess over. The truth is that if you make sure that the information in your credit report is accurate and up-to-date, and if you engage in health financial behaviors, your credit score is likely to take care of itself.