Credit Report Vs Credit Score

In the financial world, one often hears about credit reports and credit scores. Sometimes, it seems as though these terms are used interchangeably. However, it is important to note that your credit score range is not the same thing as a credit report. Understanding the difference between these two measures of your financial reputation is essential to a well-rounded financial education.

Credit Report

Your credit report, also referred to as your credit history, is a detailed look at your financial transactions dealing with credit. Every loan that you ever receive is present, for at least some time, on at least one credit report from one of the three major credit bureaus. Credit cards, auto loans, student loans and even payday loans are listed on your credit report. Information on loans is also present, including how much you have borrowed, what kind of loan it is (revolving or installment), and whether you make on-time payments.

Your credit report also includes information about whether or not you have been applying for credit. It can also include information about your employment, current and recent addresses, and any former names or known aliases. While your payments to utility companies are not usually reported to the credit bureaus, if you miss payments, or are late with payments, companies can report those negative actions and they can show up on your report.

The nice thing about your credit report is that you are entitled to one free copy of your report each year, from each of the three major credit bureaus. You can visit annualcreditreport.com to receive your credit report. Ensuring that your credit report contains accurate information is important, since it can affect whether or not you get a loan in the future, the interest that you pay on that loan, your insurance premiums, and whether or not you are hired for some jobs.

If you are not happy with the way information is reported, you can dispute items in your credit report. If you feel explanation is warranted, you can add notes to your credit history explaining your circumstances.

Credit Score

While your credit report is an in-depth accounting of your credit transactions, your credit score is a numerical representation of your history. While a credit history requires some looking through, a credit score offers a summary of your credit history at a single glance. Your credit score is based on information in your credit report. It is used to help lenders (and others) make decisions about how much of a financial risk you are. If negative information appears in your credit report, it can lower your score and result in higher interest rates on loans – or credit denial.

Credit scores are figured using different proprietary techniques. Many lenders use the FICO score as a basis for their decisions, but most have subtle variations that weight items differently. Each of the major credit bureaus also issues its own score, based on information in your credit report. Some insurance companies and other companies related to finances have their own scoring methods, based somewhat on the FICO method. Because there is no standard credit scoring method, you might find that your scores from different sources vary by up to 15 or 20 points.

You can improve your credit score by making payments on time, reducing your debt and establishing a history of responsible credit use. These actions will appear in your credit report, and that information will be used to determine your credit score.