What Is A Credit Score?

You’ve heard that a credit score is important, haven’t you?  You may have even heard how you should protect your credit score.  But a lot of people are still unsure of what a credit score actually is.

Let’s take a look at credit scores and what they mean.  This way you know once and for all what they are and how they are used.

A credit score is a calculation based on information from a credit report which gives a representation of how credit-worthy a person is or how likely a person is to default on their loan.

Let’s take a quick step back, shall we?  We’re talking about credit scores but it’s important to understand what a credit report is all well.  Your credit report is basically a listing of all the credit accounts you have and your history paying your credit, or debt, off.  Sometimes the report is referred to as your credit history.  The information comes from the lenders who report your activity to the three major credit bureaus.

To quickly sum up — your credit report gives information and a history of your credit accounts.  Now back to credit scores…

Your credit score gives a number range to quickly sum up the information from your credit report.

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I hear a lot of people interchanging the term credit report with credit score.

I do it myself.

But there’s a Big Difference between the two.  See how I bolded that there?  That’s how important it is.

Knowing the details of a credit report vs a credit score will help you better understand your credit.  And that can help you save money!

Differences Between a Credit Report and a Credit Score

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By now, many of us know what a serious thing it is to protect our identities.

Identity fraud is a very real threat, and victims of identity theft find themselves fighting an uphill battle when it comes to fixing their credit, and sorting out other related problems.

However, many of us don’t think that our kids have anything to worry about.  After all, they aren’t 18.

Unfortunately, there is information out there about children, too, and a growing rash of child identity theft reports could indicate that your child could be in trouble.

How Does Child Identity Theft Work?

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Your credit score is an incredible tool that can build up your life if used properly and tear it down if abused.

The difference between a great credit score and an okay credit score might be the difference in 0.5% interest on a home or auto loan and thousands of extra dollars of interest paid.

If you’re looking to protect your credit score you need to be aware of the difference between a soft credit pull and a hard credit pull.  One can damage your credit score while the other is mostly harmless.

Do you know the difference?

Two Types of Credit Inquiries: Soft Pull and Hard Pull

Here’s a look at the two types of credit report pulls.

What is a Soft Credit Pull?

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Having a good credit score impacts many areas of your life: the interest rates you pay on debt, your car insurance rates, and what types of credit card offers you get in the mail.

If you find yourself with a poor credit score, but have a need to improve it quickly, there are a few tips you can try.

However, the only true way to drastically improve your score is to use debt responsibly for a long period of time.

What Goes Into a Credit Score?

Before you can improve your credit score you need to know what exactly goes into your credit score in the first place.  Once you know what goes into the credit score you can work to make changes in those specific areas.

We have a full post that dissects what goes into your credit score, but here’s a brief breakdown:

• 35% – Payment History
• 30% – Amounts Owed
• 15% – Length of Credit History
• 10% – New Credit
• 10% – Types of credit used

How to Improve in Each Credit Score Area

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