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The Difference Between Your Credit Report and Credit Score

Regardless of what your financial situation may be, there is one step that needs to be fulfilled before you can reach that silver lining: understanding it.

Scores, reports, mathematical equations, due dates, debt and money – there’s no doubt that your brain becomes one big knot of financial distress when the word “credit” enters it. There seems to be no silver lining when it comes to dealing with your personal credit. And as long as you’re borrowing money from an institution, your credit report and score will go hand-in-hand with one another. Don’t be fooled though, this should not be perceived as entirely negative.

In fact, when it comes to managing your finances, sometimes it’s actually better to have credit than none at all. That being said, poor financial moves on your end can affect your chances of getting a loan or credit card, and the worst part is that these things can stay on your credit report for up to 6 years. Regardless of what your financial situation may be, there is one step that needs to be fulfilled before you can reach that silver lining: understanding it. How it’s calculated, who calculates it, what effects it and how credit affects you – unravelling the knot of credit is step number 1.

Credit Report

When it comes to financial data and personal history, your credit report can be a very confusing thing to understand. Over 21 million Canadians have a credit report, and the majority of us are oblivious to its importance.

To put it simply: your credit report is a summary of your credit history. Any time you borrow money that isn’t yours, like a financial loan or credit card, it gets documented on a report that has your name on it. Personal information, like missed payments, your SIN number and the accounts you have opened, are also on the report and can be accessed by financial institutions like banks, credit card companies and auto leasing companies through credit reporting agencies. These agencies are also known as credit bureaus, which are governed businesses that collect and store information on how well you manage your finances. In Canada there are two credit bureaus: Equifax Canada and TransUnion Canada. Whenever you apply to borrow money from an institution, these bureaus will check to see if you’re financially capable of handling the debt based on your history with money. An easy way for them to do this is to look at your credit score…

Credit Score

Your credit score is a significant factor that is derived from your credit report – points account for financial actions that you make, and they add up to a number that ranges between 300 (lowest) and 900 (highest). The higher your credit score, the greater likelihood you’ll have of getting a loan. Making precise and regular payments on debt, understanding how to read your credit report, and lowering your available limit on credit loans are all great tactics to build up your credit score.

Hearing the words “credit report” and “credit score” is just the tip of the “finance iceberg”. Dissecting what they both mean and how you can use them as tools to your advantage is an essential way to keep yourself informed and on top of your finances.

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