Are your credit score and a credit report the same thing? Nope. Not even a little bit! But the two are often conflated by consumers.
A credit report takes a detailed look at your finances while a credit score is a numerical rating of your credit report. Think, a teacher grading your English paper.
A credit report is used by lending institutions as a shortcut to decide whether you’re a good risk for a loan.
Both of those tools are used by lending institutions as part of the mortgage loan process, as well as other loan types. Their impact on your financial future is huge.
That’s why you want to be as informed as possible so that neither negatively impacts your financial advancement.
Both of those tools are used by lending institutions as part of the mortgage loan process, as well as other loan types. Their impact on your financial future is huge.
That’s why you want to be as informed as possible so that neither negatively impacts your financial advancement.
What is a Credit Report?
Actually, there are three credit reports. Here in the US, we have Equifax, Experian, and TransUnion credit bureaus.
These powerhouse agencies compete to offer the most comprehensive data to their customers such as car loan providers, mortgage lenders, landlords, collection agencies, potential and current employees.
Together, they sponsor a government sanctioned site, AnnualCreditReport.com which provides consumers applications for getting credit reports.
Every person in the US is entitled to one free credit report per year, one from each bureau. We highly recommend you take advantage of this service!
So, what does a credit bureau evaluate to determine your credit status? Here are the four categories:
If you’re delinquent on bills, it will show up on your credit report. A credit report also gives information on accounts you have opened, any outstanding balances, and many other details.
Each credit report company gives slightly different information. That’s why it’s important to look at all three companies to get a well-rounded picture of your credit fitness.
Depending on the lending institution’s methodology, all of your financial activity may not find its way into all of the credit reports.
What’s more, a business isn’t required to report to all of the bureaus or to any of them! If there is incorrect or missing information, it’s not the bureaus’ error.
That’s why checking all three credit bureaus is essential.
These powerhouse agencies compete to offer the most comprehensive data to their customers such as car loan providers, mortgage lenders, landlords, collection agencies, potential and current employees.
Together, they sponsor a government sanctioned site, AnnualCreditReport.com which provides consumers applications for getting credit reports.
Every person in the US is entitled to one free credit report per year, one from each bureau. We highly recommend you take advantage of this service!
So, what does a credit bureau evaluate to determine your credit status? Here are the four categories:
- Identifying information
- Credit accounts
- Credit inquiries
- Public records
If you’re delinquent on bills, it will show up on your credit report. A credit report also gives information on accounts you have opened, any outstanding balances, and many other details.
Each credit report company gives slightly different information. That’s why it’s important to look at all three companies to get a well-rounded picture of your credit fitness.
Depending on the lending institution’s methodology, all of your financial activity may not find its way into all of the credit reports.
What’s more, a business isn’t required to report to all of the bureaus or to any of them! If there is incorrect or missing information, it’s not the bureaus’ error.
That’s why checking all three credit bureaus is essential.
What is a Credit Score?
Your credit report is a “snapshot” of your credit report, according to Bethy Hardeman, former senior manager for product marketing at Credit Karma, a credit advisory website.
Many lenders, especially credit card companies, don’t really care about your credit report. They don’t want to dig through all the data to judge how creditworthy you are for a loan.
Instead, they will pay another company to do that work for them. Companies such as VantageScore and FICO dominate the field.
Your credit score can be as low as 300 or as high as 850. The higher the score, the less risk you represent. That score is calculated using five weighted categories:
- Length of credit history-15%
- Credit mix-10%
- New credit-10%
- Amounts owed-30%
- Payment history-35%
FICO calculates your credit score using the above categories. Not all lenders use FICO. Different lenders use different scoring models. So, it’s not unusual to have multiple credit scores.
Unlike credit reports, consumers aren’t entitled to receive your credit scores for free. The Dodd-Frank Act gives consumers the right to see their credit score from any creditor using it to make a credit decision.
However, many credit card company and other financial institutions do provide this service free of charge.
The Key Differences Between Your Credit Score and Your Credit Report
Your credit score and credit report are different but linked.
Both of these tools are important but if you really want to know how the financial world reviews your credit, dig into a credit report or three!
A good credit score is your currency in the financial world. It is paramount to getting a preferred interest rate and loan terms from your lender.
Be proactive! Take advantage of the yearly free credit report and get them from all three bureaus.
Ready to close on your new home? Turn to the pros at Lilly Title & Settlement. We’re obsessed with settlement legal details so you can get into your home more quickly!
- Credit score is a single numerical grade
- Credit report is a detailed compilation of your financial situation
- Both can be used by lenders to decide whether to lend you money
Both of these tools are important but if you really want to know how the financial world reviews your credit, dig into a credit report or three!
A good credit score is your currency in the financial world. It is paramount to getting a preferred interest rate and loan terms from your lender.
Be proactive! Take advantage of the yearly free credit report and get them from all three bureaus.
Ready to close on your new home? Turn to the pros at Lilly Title & Settlement. We’re obsessed with settlement legal details so you can get into your home more quickly!
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