Knowing the difference between credit score and credit report is important to your credit health. A credit report contains information about your past credit activity and current credit situation. In contrast, your credit score is a three-digit number used by lenders in the United States to evaluate how risky you are as a borrower. Credit reports are often lengthy and include information such as the age of your accounts and whether you have a reputation for paying bills on time. However, a credit report does not contain a borrower’s credit score. A credit score of 690 and above is considered good, while scoring above 720 is deemed excellent by lenders.
Learn the Difference Between Credit Score and Credit Report
These two terms might sound almost interchangeable but offer different insights into how borrowers have managed credit in the past. The difference between a credit score and a credit report is easy to miss but having a good one and a matching credit report is a key to accessing different financial products. We’ve broken it up for you below to help you understand how they’re different and why it’s important to keep track of both.
About Credit Scores
In a nutshell, the difference between a credit score and a credit report is that a credit score is a three-digit number that gives lenders a snapshot of how creditworthy you are. In contrast, a credit report shows your total history. Credit card companies, banks, auto lenders, or pretty much any institution that wants to extend your credit rely on credit scores to determine if you qualify for credit. Non-lenders, like a potential landlord, for example, can also access your credit score if they’re uncertain about your financial health and ability to pay for a house. Figure out your credit score now to see how you rank:
The FICO score is the most commonly used scoring model, especially when submitting a credit card or auto loan application. VantageScore is a competing scoring model that many lenders across the United States also use. All scoring models have in common that they use existing information found in your credit report to calculate your credit score. 5 important factors they take into consideration when calculating your credit score include:
- Your repayment history. Lenders want to know whether you make any outstanding credit payments on time or if you have a history of defaulting.
- How long you’ve handled credit. Lenders prefer to extend credit to borrowers with a long history of handling credit responsibly. Not surprisingly, borrowers in the United States with a credit score of 750 and above have accounts that have been open for an average of 7.5 years.
- The credit utilization ratio. This is a measure of how much of your allowed credit limit you’re currently utilizing. A higher ratio implies that you’re a risky borrower who might be prone to overspending.
- The number of credit applications you’ve made in the recent past. Every new application for credit triggers a “hard inquiry” in your credit report which lowers your credit score. It’s advisable to open at most 2 lines of credit annually to maintain a healthy credit score.
- Your credit mix. Having different types of credit like car loans, a mortgage, and credit cards can boost your credit score.
A credit score of 690 and above is considered good, while scoring above 720 is deemed excellent by lenders. If you have a good score with one scoring model, you’ll likely score well with the other since they all use these same factors to rank your creditworthiness.
Calculate your Score
Your Fico Score can impact the terms of a loan, including how much interest you’ll pay on the loan. My FICO’s credit score calculator is a handy tool you can use to determine your credit score.
What’s a Credit Report?
To better understand your credit history, lenders have to go a step further and analyze your credit report before extending you credit. Your credit report is an exhaustive list of your history with lenders as reported by credit-reporting companies. However, a credit report does not contain a borrower’s credit score – this subtly shows the main difference between a credit score and a credit report.
Credit reports are often lengthy and include information such as the age of your accounts and whether you have a reputation of paying bills on time. By analyzing your credit report, lenders can see how much of your credit line you’ve already used and whether you’re looking for new credit lines. In short, it gives credit reporting agencies a broader view of how you manage credit generally and informs their decisions to approve or deny you credit. If you’ve ever filed for bankruptcy, gotten arrested or sued, this information will also show up in your credit report.
Equifax, TransUnion, and Experian are the three main credit reporting agencies in the United States. Before a lender makes a credit decision on a prospect or borrower, they’ll usually approach these credit agencies and buy the credit reports they need. The information found inside these credit reports is then used by lenders to evaluate an applicant’s eligibility for different lines of credit. Since lenders can review both from either of the three reporting agencies we mentioned above, it’s advisable that you request and compare all three reports. If you notice any inconsistencies, you can quickly file a dispute with the specific agency and have it corrected.
Accessing your Credit Report
Your credit report is only compiled after you or a lender that is considering your application requests for it.
NerdWallet has a free credit report summary that is updated every week – you can use it to keep close tabs on your credit report.
The Difference Between a Credit Score and a Credit Report
A credit report keeps track of your past and present credit activity and includes the current status of your outstanding loans and credit accounts. Lenders use this information to evaluate prospects and borrowers looking for lines of credit. Conversely, your score is a calculated figure based on the available information found inside your credit report.
This is the main underlying difference between a credit score and a credit report. However, it’s important to note that your credit score and your credit report have a symbiotic relationship i.e. one cannot exist without the other. Start monitoring your credit now to prevent negative marks on your credit report.