Know the Difference Between Credit Score and Credit Report

A couple of weeks ago, I helped my neighbor to obtain a copy of his credit score and credit report. I realized he didn’t know the difference between the two. Since that day, I asked numerous individuals about it, most of them unknown about the difference.

Here is the basic difference between Credit Score and Credit Report:

Credit Report

A credit report is a brief report of our financial health. It comprises of our payment history.

Credit Score

This is not a report. It’s a score, actual number.

While a credit report is a summary of every individual’s payment history, Credit score is number between 300 and 830. The former is maintained by Experian, TransUnion, and Equifax and the latter is totaled by FICO.

Obtaining a credit report is free for the first time in a year. Later, you will have to pay per copy. FICO score can be studied free by signing up for a 30 day trial. After this period, however, you will have to pay to check your scores.

Credit Report

Since it is a detailed report of your payment history, it is checked by everyone who plans to lend you a loan to assess your credit worthiness and payment habits. It is statement of how responsible you are.

This report contains all your valuable information like your name, mailing address, Social Security, employment information, date of birth, etc. Any account established with any lender is reported in this report. This would include any types of loans like student loan, credit card, mortgage, auto finance, etc.

Whenever you send an application to a lender requesting for a loan, you unknowingly permit them to get a copy of your report. The inquiry you made, too, appears on your credit report. Hence, details of every lender you approached can be seen in the inquiry section. In short, credit report is a statement of how you handle your finance. Right, there’s no privacy.

Credit Score

This score is nothing but a numerical representation of your report. This score varies from 300 to 850. Instead of going through the entire report, lenders find it easy to gauge your creditworthiness through credit score. This is, however, not just a numerical representation. If the score is low, it gets difficult for an individual to to get a job or a loan. Even if he manages to get a loan, the rate would be much higher than the prevailing rates.

This score was introduced by Fair Isaac Corp, known as FICO score, and it most commonly used throughout the country. There are, however, other scores as well like the ones introduced by TransUnion, Equifax, and Experian.

The FICO score is categorized as follows;

Your payment history – 35%
Amount Due – 30%
Period of Credit History – 15%
New Credit – 10%
Kinds of Credit – 10%

It is possible to improve your score after it has been ruined. However, takes time. It should also be realized that the factors affecting the score varies minutely from person to person.

 

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