One of the common queries the team here at Fincar deals with is the matter of credit scores and credit reports. Many are unsure of the differences, in addition to the ambiguity over whether one is any more important than the other. The truth is, the two are interrelated, and it’s imperative that you understand both.
What are the differences?
A credit report is a comprehensive and documented overview of your financial history. It will also detail some information as to your employment history and personal details, like age, address, name and gender. However, the emphasis is on capturing your history of repayments, credit applications, lines of credit, directorships you may hold, and any instances of financial default.
Meanwhile, a credit score is a grading given to an individual that summarises the overall standing of their credit report. This score will range between 0-1200, where a higher score, generally above 800, is considered to be of ‘excellent’ financial health. There is some risk-assessment weighted towards an individual’s likelihood to go into default over the following year, as well as a comparison with respect to other Australian borrowers.
What impact are the two likely to have on me?
The two elements are likely to have a significant impact on the quality of your livelihood, both in the short term, as well as the long term. Lenders may look at your credit score to assess your suitability for a loan. It may also influence the interest rates that you are able to attain from a financier, which in turn could dictate what type of car or property you are able to afford.
Furthermore, prospective employers in the financial services sector may give consideration to your credit report when deciding about your suitability for certain roles. For example, if you are looking to work in a financial advisory capacity, your personal financial history will be important.
What measures can I take to improve my credit?
First things first, you can, and should gain access to both your credit score and credit report to know how your financial health is likely to be viewed by others. Many service providers are now able to offer this to you for free, so there’s no excuse not to be across things.
Beyond that however, the most important thing you can do is to ensure that you pay your existing debt on time. Whether it be an existing line of credit, or your utility bills, it’s vital you do not fall into arrears. It is also wise to avoid applying for any lines of credit that would otherwise be completely unnecessary. Every time you open a line of credit it is reported on your report, and ultimately, introduces another element of risk regarding your ability to repay a new loan. Finally, a stable line of employment will also be beneficial.
The Fincar team is here to help you with all your financing needs. Contact us today to help arrange your next car or equipment loan.