Your credit score can affect a variety of things in your life from applying for a home or personal loan, buying a car on finance, any insurance and even applying for a new job. That is why it’s important to ensure that your credit report is correct and reflects your finances accurately.

Check your credit score and credit report at least once a year to ensure everything is correct. You can find free credit reports online to keep up to date with your credit information.

Some industry leaders might argue that the free reports available online are not as comprehensive as paid reports and they may not paint the full picture of your credit situation.

What is a Credit Report?

Your credit report is a record of your full credit history based on the information provided by your creditors (that is, banks, loan companies or stores where you have a store credit card).

You can obtain a copy of your credit report from a variety of different providers, for free or a small fee. There are numerous sites online that provide free credit reports, or you can purchase one from any of the registered credit bureaus.

You are entitled to one free report each year and will be required to pay a fee for any subsequent reports you might request within the following 12 months.

A credit report will detail your risk status in terms of borrowing money and what factors have contributed to your risk status. For example, you might have a high-risk status if you’ve maxed out your credit card and failed to make a few payments in the past.

Alternatively, if you are very conscious about your money and only use a small amount on your credit card, paying it off in full every month, your risk status will be much more favorable. You are likely to be approved for credit in the future with a lower risk profile.

You can thus, use your credit report to see how to better your financial situation for future lending needs. In the same vein, if you’ve applied for credit and get denied, your credit report can help you to see why.

The Difference between Free and Paid Reports

There is a real difference in the content that both free and paid credit reports provide. With a paid report you will get a visual credit status which you can compare against the credit bureau's to see how creditworthy you are.

It also includes a more detailed report so you can tell whether your credit status has or will be improving or worsening rather than just a snapshot in time. You can make better-informed decisions based on the fact your score is derived from analysis of lots of detailed information.

As a consumer, you will receive a lot more information and benefits from a paid credit report.

Credit Score Differences

While the reports may only differ slightly, your credit score will differ greatly depending on which model is used. Most reports do not come standard with your credit score since there are hundreds of different models that can be used to calculate your score.

When a lender requests your report, they will pay extra to receive your credit score based on the model of their choice. This means that if you apply for similar loans from two different places, they could each receive a different credit score for you should they make use of different scoring models.

Based on this information, it is clear that there is not much difference between free and paid credit reports. Differences only come into play when you request reports from different sources. Additionally, the report you can request for free will certainly differ slightly to the reports requested by companies that are evaluating your risk profile to lend you money.