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Credit Report or Credit Score?

Credit Report or Credit Score?

         

          They sound similar and each use some of the same info – about your finances! – but their use and purpose are greatly different. What’s the difference between a credit report and a credit score?

          A credit score is the numerical value calculated from information in your credit file that is used by lenders and landlords to assess your “credit risk” at that time. A total number of points—a credit score—help to predict how creditworthy you are, that is, how likely you are to repay a loan and make the payments on time. This score changes over time to accurately reflect your current financial behavior. While there are numerous credit-scoring formulas, FICO is the most-widely known and used by many creditors. Your FICO score can range from 300 to 850, with under 400 being quite low and 700+ putting you in the healthy range. Your credit score is meant to give potential lenders an idea of how big of a financial risk you are. In their eyes, the higher your score, the less likely you are to default or make late payments.

          A credit report is a summary of your financial reliability—for the most part, your history of paying debts and other bills. Credit bureaus (also known as credit reporting agencies) provide information received from other credit reporting companies, credit card companies, lenders and employers. In addition to identifying information, credit reports include information such as the number and types of accounts you have, payment history, collection actions, outstanding debt, age of your accounts, and any public record or collection items among others. It also includes a list of everyone who has received a credit report for you for a specified period of time (known as “inquiries”). Whenever you apply for a credit card, loan, etc., the company you apply with requests a copy of your credit report from one of the three credit reporting agencies -Equifax, Experian and TransUnion.

          While the credit-reporting agencies do their best to keep your record free of errors, slip-ups do happen. That’s why it’s important to check your credit report at least once a year. Consumers are entitled to one free credit report every 12 months, available at AnnualCreditReport.com.  Keep in mind that each agency may have slightly different information and, consequently, may have errors another credit report doesn’t. It’s important to know, however, your credit report does not include your three-digit credit score.

          Unlike your credit report, you are not always able to obtain your credit score for free. When you order a free credit report, you’ll usually have an option to buy your numerical credit score for $7 to $12. There are services, such as Credit Karma, that will provide you with a credit score for free, but this number is only an estimate—it’s not necessarily the credit score FICO and other agencies may have.

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