Why Your Credit Report Is More Important Than Your Credit Score

Tristan Powys (Credit Counsellor) @ Lucid Living

Focusing only your credit score is like focusing only on your cholesterol number – the number’s important, but not as important as how you got there. That’s why the real key to credit is your credit report.

If there are inaccuracies on your credit report, your credit score will suffer. Inaccurate or negative information can affect what you pay for insurance, your ability to get a job or rent a home, and how much you will pay to borrow money.

The good news is the credit report, rather than a credit score, is something you can change – either by eliminating bad habits or correcting errors.

Here are some other reasons to focus on your credit report rather than your credit score:

1. You can’t dispute a credit score, but you can dispute parts of a credit report.

You can protest — in writing — any information you feel is incorrect or incomplete. Even if the information is factually correct, you have the right to tell your side of the story in up to 100 words, and the credit bureau must attach the information to your file unless the credit bureau decides the statement is irrelevant. Anyone who requests a copy of your credit report would get this statement with it. They’re not required to, but may take it into account and cut you a break.

2. Your credit score differs by credit bureau and scoring model, so it’s harder to get an accurate picture.

The credit bureaus offer their own specialized scores, with varying formulas. Also, the big lenders, the banks and the credit card companies end up with their own valuation. And even if Lender A and Lender B use exactly the same data, exactly the same credit scores, they could treat the scores differently. Lender A could treat your credit score like a subprime score and charge you more, and Lender B might treat it as a prime score and charge you less. This is one reason it’s important to shop around for credit.

3. Your credit score simply represents the information in your credit report.

It’s like an English paper in high school, says Rod Griffin, director of education for credit bureau Experian. You don’t have a grade until you give it to the teacher. “You do the ‘paper’ – you decide how you’ll manage the bills and how much debt you’re going to have. When you apply for credit, the lender is the teacher. They will use a credit score to analyze the information. Every time your credit score is requested, a different score could be calculated, even if it’s just a few minutes apart,” he says.

4. Insurers rely on information pulled from your credit report.

Insurers rely on a credit-based insurance scores, using key information from your credit report. “They’re looking for someone whose credit history has shown them to be a responsible person. The insurance industry has found this a very predictive model when they are assessing the likelihood of whether someone will file a claim,” says Michael Barry, of the Insurance Information Institute.

5. Potential employers will be looking at your credit report, not your credit score.

Employers almost never receive a credit score,they get an employee”s credit report. Employers use the personal and account information to confirm your identity and to see how you handle money. The latter reason is controversial and therefore limits an employers’ ability to check applicants’ credit only where the information is vital to the job’s duties.

6. Your credit report may tip you off to identity theft.

Don’t assume that a misspelled name or incorrect address means the bank just made a harmless error. This could signal that someone has opened up an account in your name. Also look for information that could belong to someone else, especially if you have a common name.

Incorrect middle initials and suffixes, such as Jr. when  Sr. is correct, are common mistakes that can lead to a faulty credit report.
Paying attention to your credit report is an effective way to prevent ID thsft and fraud. So your first step is to get your credit report.

If you find errors, you have a right to dispute the information. Under the National Credit Act, both the credit bureau and the company that provided the information (such as a bank) are responsible for correcting inaccurate information, so contact them both.

If the information is accurate but there are parts you’d like to clean up, contact Lucid Living (on 010 590 5617) to assist you. Lucid will negotiate with your creditors to remove or update that ugly data early.