In a previous blog, we discussed how your employer can use your credit report, but the myth that they can check your credit score is still pervasive. The reason this myth won’t die is because people still tend to use the terms credit score and credit report interchangeably. We’re here to clear up the difference.
Credit Reports: Your Credit History
Your credit report is a document recording your credit history and includes:
- Past and present credit accounts
- Credit inquiries
- Public record and collections
Keep Your Report in the System
If you have good credit, are debt free, and decide to close your lines of credit, you’re at risk of being deleted from credit reporting systems after 10 years, which means you’ll no longer have a credit history. Without a credit history, it’ll be difficult for you to take out a loan. So keep at least one line of credit open that you use occasionally and pay off each month to keep your record in the system.
Who Can See It?
Only you can see your credit report with the exception of:
- Insurance companies
- Collection agencies
These entities can view your credit report, but only if they have permissible purpose. For example, for underwriting insurance or to determine if they can give you a loan. Employers can also see your credit report if they have your permission.
Credit Scores: An Important Number
Unlike a credit report, which can exist without a credit score, your credit score cannot exist without your credit report because it’s based on the information present in it. Credit score is a number calculated by your:
- Amounts owed
- New lines of credit
- Length of credit history
- Credit mix
- Payment history
These numbers then come together to form your credit score, which typically have a score range of 300-850, which measures your risk to lenders.
Good Credit Benefits You
If you have a good credit score, you will be more likely to get a Kansas City home loan with lower rates. If your credit score is less than ideal, you will be more unlikely to get a Kansas City loan because lenders will see you as more of a risk. You can improve your credit by:
- Paying payments on time
- Keep balances low
- Don’t unnecessarily open new lines of credit
Who Can See It?
Who can see your credit score is the same as your credit report with the exception of your employer. If you find that your credit report and credit score was accessed without your permission, say, by an employer, they could have violated the Fair Credit Reporting Act (FCRA). In this situation, you need to seek legal counsel immediately.