How Healthy Is Your Credit?

Understand the Difference Between Credit Report Vs Credit Score

While many people will interchange credit report and credit score when talking about credit history, it’s important to understand the difference between credit report vs credit score. While your credit report and credit scores are related, they are two separate reports provided by the credit reporting bureaus. Each reporting bureau creates their own credit report and then calculates a credit score based on the entries in your credit report. Each bureau calculates credit scores differently, so although your credit history may be the same at each bureau you may have an entirely different credit score based on your credit history.

Credit Report

Your credit report is a detailed overview of your credit history from the last 7 to 10 years and contains the following information:

Personally Identifiable Information - This includes your name, social security number, address (and former addresses), and employer (and former employers). This alone is enough information for an identity thief to open an account in your name so be careful who has access to your credit report.
Account Information - Each credit account you have open including any credit cards, car loans, mortgages, student loans, personal loans and other debt will be listed. Your credit report will show how long each account has been open along with your payment history.
Public Records - This might include filing for bankruptcy or any judgments made against you regarding your debt.

Lenders rely heavily on your credit report to help determine how much of a risk you will be when extending credit. If you have made late payments, defaulted on accounts or have accounts in collections, this will all reflect badly upon you through your credit report.

It’s important to check your credit report regularly to ensure that all of the information being reported about you is true and accurate. If you find discrepancies such as an account opened in your name that you have no knowledge of it may be the first sign of identity theft. However, errors on credit reports are fairly common so it may just be from human error. Disputing false information is the easiest way to get to the bottom of it.

Credit Score

Your credit score is largely determined by entries in your credit report. If you have a bunch of late payments or other negative marks on your credit report then your credit score is sure to suffer as well. Your credit score might range from 300 to 850 with 720 and up being the best possible credit score.

Here’s an estimation of how your credit score is calculated. Please note that each credit bureau has their own system for calculating your score which may be slightly different.

Payment History – 35%
Amount of Debt Owed – 30%
Length of History – 15%
Types of Credit Used – 10%
New Credit – 10%

Your credit score is like a single number snapshot of your credit history that lenders, insurers and even potential employers use to judge your overall credit history. Just when you thought your credit score was all about getting loans many insurers and employers began using credit scores as well. Now your car insurance rates might be higher based on your credit history and you might not get that dream job you’ve always wanted with a bad credit score.

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