What is the Difference Between a Credit Report and a Credit Score?
November 19, 2013
Whether you are buying a home or looking for a quote on your auto insurance, chances are that someone is going to be checking your credit. Sometimes this means looking at your credit report, and sometimes it means looking at your credit score.
Sometimes it means looking at both.
It’s easy to get a little mixed up on the difference between a credit report and a credit score. Here are the basics of what to expect when your credit is considered:
The Credit Report
Your credit report is a history of your credit transactions. It is a compilation of the financial transactions you have made involving borrowing money. Your credit report includes information about your loans as well as information about which companies are making inquiries about your credit situation. Detailed information about your borrowing is shared including:
- Who gave you the loan.
- How long you have had the loan.
- The amount of the loan.
- The credit limit (for revolving credit).
- The payment history, including your monthly payment record for credit cards.
- Whether the loan has been paid off.
Additionally, when companies make hard inquiries into your credit, they show up on your credit report, indicating that you are applying for credit right now.
Your credit report might also include information about past and current employers (although this information doesn’t influence your score) as well as your name and aliases, and your current and past addresses. All of this information can be taken into account when making decisions.
Special versions of your credit report might be prepared for different purposes. For example, some employers might ask to look at your credit report. A version of your credit report showing certain information is supposed to be sent to your employer. Then, that information can be used to make a hiring decision. When you buy a home, your full credit history is likely to be combed over.
Unlike a credit report, which spells out your entire credit history, a credit score is three numbers. However, the credit score is based on the information in your credit report. All of the information in your credit report is converted into a form that can be fed into a special algorithm. Different weights for different portions of your credit history are used. All of this information is plugged into a formula, and the result is your credit score.
There are different versions of your credit score, depending on what information is used. If your Equifax credit report is used, it might have different information from your TransUnion credit report, so your Equifax credit score will be different from your TransUnion score. The credit scoring giant FICO has a number of variations that it uses to emphasize different aspects of your credit report. Even individual banks sometimes have their own models.
Your credit score is a way to get an idea, at a glance, of your credit situation. It helps when making decisions about whether to approve you for a loan, and what terms you will receive if you are approved.
Credit scores are often used with car loans, since it makes it quick and easy to see what you qualify for. Others, like insurers, may use credit scores to get an overall idea of your level of responsibility and make a decision about your premium.
The main thing to remember is that your credit score is based on the information in your credit report. If you are careful with your credit report, you are more likely to have a higher credit score.
What other questions do you have about your credit score or credit report? Leave a comment!
This article was originally published October 29th, 2012.
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