A credit report is not the same as a credit score. You probably have heard the two being used interchangeably. Although they are information related to your ability to get credit, they represent two different aspects of your credit behavior.
So, what is the difference between a credit score and a credit report?
This is what you will be learning in my article. The purpose of a credit score and a credit report is to protect financial institutions from serial debtors. By serial debtors here, I refer to people who borrow loans and do not pay back.
Or worse, people who pay back debt late.
While a credit report compiles a history of their financial records, the credit score is used to rank potential borrowers. Banks look at your credit score and your credit report before they decide to give you loans or a credit card. Here is what you need to know about credit report and credit score.
What Are Credit Scores
A credit score is a financial metric used to rank your credit behavior. By credit behavior, I refer to your ability to borrow and pay back loan in a timely manner. Credit scores are represented in a 3-digit form, and it is a range.
Typically, the credit score range is classified into five categories. Namely: Poor, Fair, Good, Very Good and Excellent. Below is what a credit score system looks like, my good reader.
| Credit Score Range | Category |
|---|---|
| less than 580 | Poor |
| 580-669 | Fair |
| 670-739 | Good |
| 740-799 | Very Good |
| 800+ | Excellent |
Each of these category has an effect on the interest rate of any loan you may borrow in the future. This is because a credit score says a lot about your ability to pay back money in a timely manner. A poor credit score will get you a high interest rates on loans. This is regardless of your high or low income.
A good credit score to have would be the Good, Very Good and Excellent categories. You will be able to enjoy low interest rates, when you fall into this categories. Also, lenders will be willing to loan you money.
While a credit score determines your interest rate, a more detailed information sheet called credit report is considered. I will be discussing that shortly. Until then, here are what else to know about credit scores.
3 Types Of Credit Scores
The three types of credit scores in the United States are FICO score, Vantage Score and basic credit score. FICO score is the most common credit scoring system. It is mainly used by financial institutions and banks to grant loans and credit card. Others are used by small businesses like rental businesses.
To reiterate, there are three credit scoring system out there. So, what is the most accurate credit score checker then?
There is no most accurate credit score checker. Each credit scoring system varies little from the other. Hence, why it does not matter the source you use to get your credit score.
Personally, I like to use FICO score to look up my credit score since it is a credit score model that lenders use. This is because it is trusted and used by banks. But, you can use whichever one works for you.
What Is A Credit Report
A credit report is a report about your financial activities year by year. This compiled information includes your credit lines, debt size, number of debts, debt repayments and other information. Having discussed credit scores earlier, the difference between a credit report and a credit score are as follows:
- Credit reports are like annual credit behavior statements.
- A credit report is not a 3-digit scoring system like a credit score.
- Finally, a credit report is more detailed than a credit score. It contains summaried information about your credit activities.
By credit activities here, I refer to every loan, credit card, debt payment or missed payment you ever had in your adult life. For these information to be assessed, it needs authorization by you. It is backed by a Federal Consumer Rights Law.
Finally, it is worthwhile to mention a credit report does not show your credit score. You will not find a credit score, if you ever got a report from any of the three credit report bureaus in the US. That is another difference between a credit score vs a credit report.
If you are looking to get a credit report or check your credit score, read my article: Where To Check Your Credit Score For Free.
What You Might Find On A Credit Report
There are factors on which credit report is based on. Usually, a credit report contains four groups of relevant information. This includes:
- Personal Information: This contains your personal information like your social security and such.
- Credit Inquiries: This section contains information about anyone who has requested a credit report. By law, you are allowed to be notified each time someone accesses your credit report.
- Credit History: The history of your loans, credit cards, loan repayments or payments are on this section.
- Public Record: This will have any bankruptcies or tax liens on it.
Sometimes, there may be a fifth section which is called a personal statement. If you are looking at your report online, this section allows you to add explanations to any negative remark on your credit report. An example may be an explanation on why you went bankrupt.
What Is Most Important- Credit Score Or Credit Report
The relationship between credit score and credit report is such that a credit score cannot be generated without a credit report. Credit scoring systems use the information done by the three major credit bureaus to rank consumers’ credit behaviors.
A Bank will use a credit score and a credit report to determine your credit worthiness. However, small businesses like rental services and car dealerships may only need your credit scores to do business with you. Do not ask why, it is how things are.
As a result, it is important to always check your credit report and credit score to ensure there are no errors on them. Any error on a credit report will affect your credit score. I once had a clerical error on my credit report, which affected my credit score. This is why I am bringing up this issue.
If you ever have a credit error problem, you can always dispute the error on your credit report. Check out the above highlighted article for how to effectively solve this problem. A credit report error is one of the things which ruin can your credit score. Hence, the importance of reviewing your credit score vs credit report annually.
Well, this is all you have to know about the difference between credit score vs credit report. Now you know these differences, I recommend you start making your debt payments on time. As a result, a good credit report and credit score will be created on your behalf by credit bureaus.
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