How is a credit report different from a credit score?


Posted by: consolidatecreditcard_admin on

You can’t afford to be nonchalant about the relevance of finance in today’s time. If you are a credit cardholder, have pending bills to make, debts to repay, and income statements to issue – it is imperative to be familiar with the various kinds of credit-related terms. For instance, do you know what a credit score is? Are you aware of the basic difference between credit reports and credit scores? Did you know that you can obtain a free credit report?

If you are confused between the two terms, you can be assured that here you will find a simple version of what is meant by credit report and credit score.

Features of a credit report

1. The credit report is informative

As the name suggests, a credit report contains all your detailed financial information such as the history of your debt accounts and the payments you’ve made. It consists of information about credit card payments, and a variety of loans such as home loans, automotive loans, and student loans.

In addition to that, it contains the status of those loans which are doubtful and are yet to be paid off.

2. The credit report is personal

A credit report also includes a wide range of personal information such as your name and address, business address, phone number, and several other information. The credit report which is registered under your name also has the detailed account details of your loan/credit card information of the loan taken, current balances, and information about whether or not you have paid the bills on time as well as the account in arrears. In a nutshell, a credit report records how well a person has kept up with his/her payment agreements with various current and previous creditors as well as the current balances on the account.

3. A credit report is diverse

In a credit report, a person can also get information about the listed inquiries that have been for new credit.

4. Your credit report won’t contain the credit score

Each of the three major credit bureaus – Equifax, Experian, and TransUnion, offer a free copy of the report once a year. It should be known to the user that the report is less likely to contain a credit score; so forget about depending on the report to obtain a credit score.

Features of a credit score

1. Credit score reveals the exact number

A credit score represents the statistical three-digit number between 300 and 850, which is generated on the basis of your credit report. It is generated from a person’s payment history, accounts owed, credit types, length of credit history, and types of credit.

2. Credit score is calculated

A credit score is calculated after scrutinizing the person’s debt against credit limit, history of debt repayments, number of accounts, type of accounts, the overall credit history, and several other financial information.

It is basically your financial report card.

3. A high credit score can be beneficial

If you have a high credit score, there will be a greater chance of taking out a new credit at lower interest rates. This will also impress lenders and they will be more than willing to sanction a person’s new credit request.

4. Your credit score contains your payment history

You ought to know that your payment history is a vital factor to consider while calculating your credit score. The credit bureaus also check past due accounts, for how long they are past due, whether or not the accounts are properly managed and if they contain any negative information.

What’s the major difference between credit reports and credit scores?

a. Credit reports are more insightful

Compared to a report, the credit score just gives a statistical indication of the number. If you have observed that your score has dropped, then the only way to determine the cause is through a credit report. A credit report gives details for things that could have caused the drop, like delinquency on payments or hard inquiries.

b. It is possible to get credit reports for free

In comparison, a credit score is usually not free of cost. Companies like American Express, Bank of America, and Chase provide customers with free FICO score monitoring. This includes an estimate of their score either online or in their monthly statements.

c. Employers can look at your credit report but not your score

Potential employers can look at your credit report with your permission. A credit report reveals a lot about your character. To a hiring manager, you may seem to have a lot more responsibility on the job or less of a risk for corporate crimes. It is estimated that nearly 47% of employers run credit checks to select job candidates. However, contrary to that, employers do not get to see your credit score when they are viewing the report.

d. Credit reports can disclose mistakes and identity theft

People often complain about the errors found in the credit report. A mistake can be something as silly as a typo or an incorrect credit limit. It could be something as serious as someone hacking into your account to rack up the debt in your name. To fix the error, you will have to contact the credit bureau and the company which reported the information.

e. Your credit score may change faster than your credit report

If you have subscribed to a credit score monitoring service, you will have an idea about the status of your score and that it can fluctuate frequently. It is due to the constant reporting of the creditors to the credit bureaus on a regular basis.

How can I access my credit report and credit score?

A credit report can be fully accessed by contacting any of the three credit reporting agencies. You can also visit the official website of the respective credit reporting agency and follow the instructions to proceed further. You will be told to file an online request form and send it along with a draft or cheque to cover the fees.

What is a good credit score?

A score generally ranges between 300-850; a credit score of 700 or above is normally considered good.

A word of advice you can follow while obtaining your credit report and score at least once a year, especially before applying for a new loan or credit card. Just to avoid making any errors, keep checking your credit reports regularly. Make it a habit to pay on time and limit your credit card usage by up to 30%.

Also, check your reports for any errors and dispute them immediately to get a good score. Ensure that your credit score doesn’t drop as compared to your average score.

How are they associated?

A higher credit score indicates that your creditworthiness is also high. The lower the score, the lender’s/creditor’s risk increases to grant your loan request. So, while your credit report comprises your entire credit history, your credit score is the total sum of the same.

If your credit score is within a certain range, your lender may offer a loan at a lower interest rate or provide you with a credit card with a higher credit limit, though all other terms and conditions might be the same.

Now that you have a clear understanding of your credit report and credit score, it’s time to go through your report and focus on improving your credit score. This will help you sort out the financial riddles of your life.