Why Credit Reports Matter
While credit scores and credit reports go hand in hand, they are two very different things. Just as all cognac is brandy, but not all brandy is cognac, all credit scores are the result of your credit report, but your credit report can exist — and is sometimes evaluated — separately from your credit score.
And, this is just one of the reasons why credit reports matter.
Lenders Review Them First
Yes, your credit score does come into play when you’re seeking a loan, however, your credit report tells lenders more about your ability to handle credit responsibly than your credit score can. As a frame of reference, think of the score as the broad strokes and the report as the details, and you’ll get the idea.
Credit Scores Vary By Agency and Model
The federal government has mandated you have free access to each of your three credit reports on an annual basis. This is important because you can have three different credit scores based upon how each reporting bureau calculates its scoring model. Therefore it’s important for you to review each report, rather than just the one. You have no reliable way of knowing which reporting bureau a lender will consult, so you have to pay attention to all three.
Credit Reports Can Be Wrong
Human beings post information to your credit reports and some of them make mistakes — routinely. Moreover, credit card fraud is a growing concern these days. As many people have learned the hard way, your identity can be stolen, used to run up charges and discarded — leaving you to reckon with the result.
This is why it’s important to review your credit report on a quarterly basis at minimum, to ensure you’re aware of bad data before it has time to fester and become nearly irreversible.
There have also been instances of credit issues having been cleared up, but not reflected on a report. Let’s say you availed yourself of credit card debt relief , but the resolution didn’t get mentioned on your report. Lenders will think you still owe it, even though you’ve cleared it up.
Disputes Are Centered On Credit Reports — Not Scores
Again, while it’s true your score is a reflection of your report, disputes you may have about your credit will be centered upon the information in your report. Moreover, even if you dispute information on your report that is correct, you have the right to attach relevant explanations of up to 100 words to entries that may have a detrimental effect on a lender’s decision. This could be the difference between getting a loan or a job and not getting them.
Credit Reports Factor into Hiring and Insurance Decisions Too
Many employers are now reviewing credit histories as part of the hiring process. In other words, your credit report might be the difference between landing your dream job and being passed over for it. Insurance companies are also examining credit reports in an effort to determine the degree of risk an applicant represents.
This is just five of the many reasons why credit reports matter. It’s important to stay abreast of changes in your report to ensure the best possible picture of you is out there. It’s about more than just getting a credit card too. Your credit report figures into whether you’ll get a cell phone plan, a home loan or an apartment, insurance or even a job.
Simply put, permanent records are real, and they absolutely can have an impact on the quality of your life.