5 Critical Differences Between Credit Reports and Credit Scores
Many people find themselves confused about the differences between credit reports and credit scores. They may know that they are different, but they don't completely understand what those differences are. Some people even think that they are the same thing. Let me help clear up some of the confusion. Here are 5 critical differences between credit reports and credit scores:
1. What they contain & how they are compiled. Both your credit reports and your credit scores are a way to show potential creditors your creditworthiness. It is something that they look at to see what type of borrower you have been. A credit report is much more detailed than a credit score. A credit score is a simple number, between 300 and 850. The higher the number, the better the score. A credit report, on the other hand, includes things like payment history, information on accounts held, judgments, bankruptcies, etc. The information within your credit report is used to compile your credit score. One is a simple number, while the other is a detailed report.
2. How they are used. A credit score is much more simple than a credit report. It is just a number. So, it is used more to compare you to other borrowers, and to see how high of a risk you are. Say you have a credit score of 400. In the past, your potential creditor has had bad results with people with scores that low. So, they view you as a high risk and may not be willing to lend to you (or will give you very high interest rates). Whereas if you were to come to them with a score of 700 or 750, they would view your level of risk much differently. On the other hand, credit reports are used when a lender wants more information on a borrower. Your credit report has much more detailed information on your borrowing and payment habits. So, with higher loans, a lender may dive much deeper into your credit. They will take into consideration your payment history, what types of debts you've taken out, if all of your cards are maxed out, etc.
3. What they are. To better understand the differences between credit reports and credit scores, you must understand exactly what they are. According to Lexington Law, a credit repair law firm, your credit report is "a report documenting a person's credit history including personal information, payment history on credit accounts, and information from public records such as liens, judgments, and bankruptcies." While your credit score is "a statistical summary of the information contained in a consumer's credit report usually graded on a scale ranging from 300 to 850."
So, your credit report is a report documenting your credit history. Your credit score is a number that is contained in your credit report. They are both ways of representing your creditworthiness to potential creditors. But one is a detailed report with a history of your habits, while the other is a number representing that history.
4. How you obtain them. There are different sites that you can go to to order your credit reports, and your credit scores. Some of them only offer one of these to you, some others will give you both. Know that, when you go to order your credit score, you will not automatically also receive your credit report, and vice versa. Make sure that you know which one you want (or if you want both), and make sure that you are ordering the right one.
5. The costs to get them. You can get a free copy of your credit report from all three credit bureaus once a year. This is not the case with your credit scores; those are not always offered for free. But some sites will give you your score for free if you sign up for their monitoring services.