Do Credit Reports Affect Your Credit Score?

Does Credit Report Influence Credit Score?

Though they are related words, credit score, and credit report are not the same. Credit reports also provide information on credit cards, loans, payment records, bankruptcies, collections, and other pertinent data about your credit history. The three credit reporting companies—Experian, TransUnion, and Equifax— generate this data.

When you seek for loan, credit reference companies also assist lenders in determining your credit situation. Your credit score is derived from the information included in your credit file. < Therefore, even if your credit report provides you with the fundamental information about your credit history, your credit score acts as the synopsis of its contents.

The fact that credit reports exist suggests that they affect the credit score. Your credit score will suffer if your credit report shows any negative records including past bankruptcy or late payments. Still, a longer average credit history and a positive payment record will help you raise your score.

Credit Score Determinants and Their Relation to Your Credit Report

Several elements in your credit report impact your credit score more than the other elements. Some of the factors that affect your score include

• Payment History – This contributes to the computation of a credit score to the tune of over one-third. You will also lose a lot of points if you have late payments or if items are sent to collections. Paying on time ensures a good rating.
• Credit Utilization – This is how much of your total amount of credit you are employing. It contributes about 30 percent of your score. To avoid unnecessary costs, analysts advise using less than thirty percent of the total capacity. There is evidence that the utilization of credit limits is counterproductive for one’s credit score.
• Average Age of Accounts – Ideally, the more accounts you have on your credit file the better. This suggests that you can handle credit responsibly should you be granted credit facilities with a certain establishment. Cancelling old accounts may reduce the overall average age of your accounts.
• These are harsh words – Bankruptcies, collections items, liens, and judgments are detrimental to credit scores. These can take up to seven years before being cleared from your report.
• Credit inquiries – Whenever you apply for a new credit, this is recorded by the credit bureaus. While hard inquiries remain on your credit report for 2 years, a large number of inquiries in a short span is considered an indication of higher credit risk and can lower your score by a few points.

Fixing inaccuracies in your credit report

Since credit report forms the basis of your score, all information in your report with Experian, Equifax, and TransUnion must be 100% accurate and updated. To the dismay of many, mistakes can and do happen in credit reports.

It is important to know that if there are mistakes on your credit report or information that is old, it can be contested. This is important because correcting the information listed in your credit reports has a direct impact on your credit rating.

The Equifax credit report free one, TransUnion credit report free one, and Experian credit report free one can all be found at annualcreditreport.com to check for errors. If you find anything wrong such as an account that was marked as unpaid when in a real sense you paid it on time or an account that shows that it is still open when in a real sense it was closed many years ago, then it is time to dispute with the bureaus.

Include as many credentials as you can to support your allegations of imprecision. Disputes are supposed to be investigated by the credit bureaus within one month which is thirty days. If they receive information that is wrong, inaccurate, or cannot be substantiated, they must take it down or change it. Although correcting credit report errors may not be very easy, it is good to work on it to improve your credit ratings.

Learn How You Can Manage Your Credit Reports And Credit Scores

It should be noted that credit reporting and credit scores should be seen more as a part of your financial management. When you are well informed on matters of credit, you can see early signs of an issue and this will help to minimize the extent of the credit deterioration. Be careful about items that impact your scores most such as payments, balances, credit age, and inquiries.

Pay your dues or correct any error that appears on your reports as early as possible. It is therefore important to understand how those reports and scores interrelate so that one can be in a position to monitor and manage his/her credit status. It is therefore important to keep your credit reports as positive as possible to increase your credit scores in the long run. It is important to be smart with credit reporting as well as credit scoring if a person is to achieve financial success.

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