The Complete Guide to Monitoring Your Credit Score & History
What is a Credit Report, and How Does it Impact Your Financial Life?
Understanding credit report is an essential part of managing your financial life. It is a record of your credit history that is maintained by a credit reporting agency. The information in your credit report includes details about any loans and other debts and how you make payments on those debts.
Your credit report also contains information about your payment history, which can affect your credit score and determine whether you can get approved for loans or other forms of financing. Understanding what a credit report is and how it impacts your financial life can help you make better decisions about borrowing money and managing debt.
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An Overview of the various Credit Report Types
Understanding your credit report is essential for managing your finances. Credit reports contain information about your credit history, including payment history, current debts, and other financial activities. Knowing the different types of credit reports can help you make informed decisions about managing your finances. This article will provide an overview of the soft pull vs. hard pull and 3-in-1 report.
Soft pull vs. Hard pull
What is a Soft pull?
– also known as soft inquiries. Soft pull on credit reports happens when a person or a company views your credit report as part of a background check. Some employers check the credit reports of their applicants and employees. When they view your credit report, that is considered a soft pull. Checking your own credit report is also an example of a gentle pull.
A soft pull doesn’t affect your credit score.
What is a Hard pull?
Also known as hard inquiries. It generally occurs when a financial institution, such as a lender or credit card, checks your credit when making a financial decision.
A hard pull can lower your credit score by a few points but won’t make a significant effect. However, multiple hard inquiries are another topic. Because multiple hard pulls in a short period can put you on a higher-risk customer.
What Information is Included in a Credit Report?
Your credit score includes your personal information and financial information.
Personal information such as your name, current and old addresses, contact numbers, id numbers, etc. Make sure that the personal data on your credit report is constantly updated, especially your address. Your credit report is mailed to you by credit bureaus, which is why your updated address is essential.
Financial information such as bad cheques, bankruptcy, and debts are sent to collection agencies. It also contains factual information about your credit card and loans. When you opened your account, how much do you owe or if you are making your payments on time?
How to Rebuild Your Credit Score & Report
Maintaining a good credit score and a clean credit report is easier said than done. Because there are times that we encounter inevitable problems, such as medical emergencies, loss of job, or losing a family member.
Circumstances like these prevent us from maintaining our good credit scores. So rebuilding our credit score is the only way to do it. Rebuilding your credit score is easy when you have the patience and discipline.
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Here are some ways to rebuild your credit score.
1. Check your credit report regularly.
2. Dispute errors on your credit report.
3. Catch up on your overdue bills.
4. Use only 30% of your credit limit.
5. Start paying your bills on time.
Understanding the Impact of an Unfavorable Credit Report
There are a lot of downsides to having a bad credit score.
1. You may experience loan denial due to a bad credit score.
2. You may lose the opportunity to get the best loan deals.
3. A low credit score hinders you from borrowing money.
4. Higher interest rates.
The Impact of Different Factors on Your Credit Score
Some factors Are used to determine your credit score. These factors help with the calculation of your credit score.
1. Payment history has the most significant impact on your credit score. 35% of your credit score depends on your payment history. You should pay your balances on time if you want a high credit score.
2. Credit utilization occupies 30% of your credit score. Multiple debts don’t mean you’re a high-risk individual. However, your credit score will begin to be impacted if you use almost all your credit limits.
3. Length of credit history with 15% of your credit score. The older your credit history is, the higher your credit score increases.
4. New credit (10%). Applying for multiple new credits for a short period can drop your credit score.
Types of credit in use (10%). Canadians with mixed credit tend to have higher credit scores than those with only one or two credits.
Maintaining good credit, as mentioned, is not easy, and it is not your fault. However, if you let your credit score stay low, that would be your fault, and you’re letting yourself suffer. Bad credit won’t let you have that financial growth we all want.
Fixing your credit is the first step in financial stability. If you need help with your credit score, contact a credit repair company and know their credit recovery services for a faster credit fix.