Credit Score vs. Credit Report: Which One Is Better?

Isn’t your credit score and credit report essentially the same thing? Not at all. Although many customers confuse the two, each contains distinct information that is utilized for distinct objectives.

Key Takeaways

• A credit report provides a comprehensive overview of your financial situation.
• It offers complete financial history information organized into four categories: identifying information, credit accounts, credit inquiries, and public records.
• A credit score is a numerical rating that measures your credit report similarly to how a teacher scores a student’s academic achievement.
• Lenders use it as a shortcut to determine whether or not to provide you credit.

Investopedia / Amelia Manley

What Is a Credit Report?

There are three credit reports, thus we should say “credit reports.” Equifax, Experian, and TransUnion are three major credit bureaus in the United States that compete to provide the most complete information to its clients. Mortgage lenders, vehicle loan providers, insurance, collection agencies, landlords, future and present employers—and you—could be among those customers.

Unlike your credit score, your credit report contains specific information about your loan, credit card, and charge card history. It is divided into four sections: personal information, credit accounts, credit inquiries, and public records. If you are late on any of your payments, your credit reports will most certainly reflect this. It also informs the reader of the number of accounts you have open, their outstanding amounts, and a variety of other statistics. 1

Each report may vary somewhat. That is why, while assessing your credit fitness, you must consider all three factors. Your behavior may or may not appear in all of your reports, depending on the lender’s approach. In other cases, the information may be erroneous or completely absent. A company is not required to report to all of the credit bureaus—or even any of them. And it’s not always the bureau’s responsibility if the data is wrong or absent. The lender might have made a mistake in reporting or delivering the data. 2

Every 12 months, you are entitled to a copy of your credit reports from all three agencies. Even better, they are completely free. AnnualCreditReport.com, a government-approved site, is sponsored by the Big Three and gives applications for obtaining your reports. 34 Other websites may provide you with the reports as part of a campaign or paid subscription. Some may attempt to deceive you into believing you’ve arrived at the official website. Don’t get taken in by it. Make that the URL address in your browser is “annualcreditreport.com,” and that you are not accessing the site via another link. To prevent fraud, enter it straight into your browser.

Every year, you are entitled to a free copy of each of your credit reports; you may view them via the government-approved website AnnualCreditReport.com.

What Is a Credit Score?

Many lenders, particularly credit card issuers, are unconcerned by what is on your credit record. They’re not interested in combing through all of the data to determine how much credit risk you pose. Instead, they hire someone to do it for them. Although other scoring businesses exist, such asVantageScore, FICO (originally the Fair Isaac Corporation) dominates the sector to the point that the phrases “credit score” and “FICO score” are sometimes used interchangeably.

Your credit score—in effect, a “snapshot of your credit record,” as Bethy Hardeman, former senior manager for product marketing at Credit Karma, a credit advising website, puts it—summarises your creditworthiness, regardless of who calculates it (much as your grade summarizes your performance in a course).A score of 300 might be as low as 300 and as high as 850. The better your score, the lower your risk. 5 It is based on five weighted categories: 6

• Payment history (35%)
• Amounts owed (30%)
• Length of credit history (15%)
• Credit mix (10%)
• New credit (10%)

Do you recall the three credit bureau reports? FICO assigns a score to each of them. Several lenders employ different scoring models, not simply FICO, therefore consumers often have numerous credit ratings. 2

Unfortunately, you are not entitled to free credit scores in the same way that you are to free credit reports. You may be required to pay for them. According to the Dodd-Frank Act, you have the right to examine your credit score from any creditor that used it to make a credit decision. 7 It is currently provided for free by many credit card issuers and other financial organizations. 8910 Advisory services such as Credit Karma may also provide you with a free credit score. But be cautious: Some websites and businesses may provide a “free” score, but it sometimes comes with costly subscription fees or other terms that you are unlikely to desire.

Credit Score vs. Credit Report: Key Differences

The distinction between a credit score and a credit report is that the former is a single numerical rating, whilst the latter is a collection of data that offers a comprehensive view of your financial condition. They are distinct yet related since the score is determined from the report. Lenders may use either to determine whether or not to provide you credit.

Your credit score is vital, but if you want to dive further and analyze your history, you’ll need your credit reports. If you want to improve your credit score, the first step is to clean up your credit reports. Correct any mistakes and identify the areas where you need to improve (for example, where your largest outstanding amounts are). Keep in mind that, regardless of what those frantic letter and email messages promising to “increase your FICO score within weeks!” promise, any good adjustment to your credit score takes time.

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