June 5, 2023

How do credit reports work?

credit reports

Credit reports reflect how well you pay back loans and accounts on credit. To take out any credit, you need to apply with a lender who checks how good you are at paying your loans. This is your credit history, and it determines a few things like whether you’re able to borrow money, how much you can borrow and what sort of interest you’ll pay.

Your credit score is a number based on your ability to pay back your debt and other details like your age and employment status. It summarises your credit report and represents how well you can handle credit and deal with debt.

Read: Credit scoring explained

The higher your score, the better your credit. The better your credit, the more likely you will be approved for credit and get better interest rates when paying it back.

Credit reports and credit scoring

Your credit report is a historical record of how well you handle debt. It contains information about the credit you’ve taken out, how well you’ve paid it back, your income, employment status, age and ID. You can’t alter or modify the information on your credit report. 

Your credit score is a three-digit number based on the information from your credit score. It represents how likely you are to repay any borrowed money. Depending on the credit bureau you use, the score can range between 400 to 940.

Remember: The higher the score, the better you are at borrowing and paying back your credit. Sometimes a lower score might not represent you are bad at paying back your credit; it might mean you don’t have enough credit data to have a good score. There are a few ways to raise your credit score.

Read: How to improve your credit score

Having bad debt that you are struggling to clear will lower your credit score, making it difficult to take out loans and get reasonable interest rates on your credit. So, if you’re battling debt and worried about the future of your credit score, it’s better to resolve it sooner rather than later.

Give Debtline a call, and we’ll help you get on top of your debt and find financial stability to get a better credit score!