Credit Score vs Credit Report: What’s the difference?

Whether you know it or not, there are people keeping track of your numbers. No, it’s not the number of times you started a diet this year or the number of sit-ups you’ve done this month. In fact, it is not your weight, cholesterol or golf handicap. Three different credit bureaus track your credit history, and they use that information to calculate and report your credit score.

Why should you care? Your credit score may determine whether you are offered a loan, a preferred interest rate or an insurance policy. Many businesses use your credit information to assess your ability to handle your financial responsibilities.

Monitoring your credit information is a healthy financial habit. But what is the difference between a credit report and a credit score, and when and why will creditors want to see them?

What is the difference between a credit report and a credit score?

Here are the basics:

• Your credit report is a record of your credit history and holds information about where you live, how well you repay your debt and whether you have filed for bankruptcy. It’s a standalone document. Think of it as your financial report card.
• Your credit score is calculated using information from your credit report and provides a snapshot of your credit risk at a particular moment. Think of it as your financial grade point average. Your credit score could range from 300 to 850. Generally, the higher the score, the better.

How is your credit score calculated?

FICO^®, formerly known as Fair, Isaac and Company, specializes in predictive analytics. The company gathers and analyzes information to predict what is likely to happen. To generate credit scores, its scoring model uses information provided by the three major credit reporting agencies:

• Equifax^®
• Experian^®
• TransUnion^®

FICO itself is not a credit reporting agency. VantageScore® and some financial institutions also create credit-scoring models.

Many factors make up your credit score. Two of the most important are your payment history and the amount you owe.

Even one late payment can negatively affect your credit. Always pay your bills on time if possible, even if that means paying only the minimum amount due. Setting up automatic payments from your checking account may help you avoid inadvertently missing a payment.

You should also keep your debt-to-available-credit ratio low by following smart credit guidelines. Try not to max out a credit card or go above its spending limit. In addition, avoid opening too many credit accounts because frequent applications for new credit may negatively affect your score.

Who looks at your credit report?

• Creditors may use your credit report, your credit score or both to determine your creditworthiness. Red flags may include foreclosure, bankruptcy, cash advances on credit cards and numerous hard credit checks, which are formal reviews of your credit report conducted by lenders when you apply for credit.
• Mortgage lenders may review credit reports for red flags and use credit scores when evaluating a borrower for a loan.
• Landlords may use credit reports to determine whether to rent to an applicant and how much to require as a security deposit. Some landlords and property management companies may also obtain credit scores.
• Auto lenders may look at credit reports for red flags and use credit scores to determine loan approval, interest rates and other terms.
• Credit card companies typically use a credit score during the application process.
• Employers may receive modified versions of applicants’ credit reports when permitted, but credit bureaus do not provide employers with credit scores.

How can you monitor your credit?

Here are a few suggestions to help you keep tabs on your credit information.

• Get your free credit reports. Federal law allows you to request free credit reports from Equifax, Experian and TransUnion. Visit AnnualCreditReport.com or call 1-877-322-8228 to request them.

Reviewing reports from all three bureaus can give you a more complete view of your credit history because the information contained in each report may differ.

• Check your reports for accuracy. Mistakes can appear on credit reports. Check the accuracy of the information, including your previous addresses and the accounts listed.

Make sure accounts you thought you closed are reported accurately. If an account should have been closed, contact the company associated with it. For other errors, contact the appropriate credit reporting bureau.

The Fair Credit Reporting Act promotes the accuracy and privacy of information held by Equifax, Experian and TransUnion. It gives consumers the right to dispute inaccurate information in their credit reports.

• Know what affects your credit score. Paying bills on time and keeping your credit balances manageable are two important ways to protect and build your credit score.

Avoid maxing out your credit cards, exceeding spending limits or applying for more credit than you need. Responsible credit management over time can help you maintain a positive credit history.

Protect your credit integrity.

Knowing the difference between a credit score and a credit report is a smart way to protect your credit integrity and manage your money. A little knowledge, regular monitoring and careful planning can go a long way toward helping you maintain a good financial score.

At GuideStone^®, we want every servant of Christ to finish well. Our mission is to enhance the financial security and resilience of those who serve the Lord. For more information, contact us at Info@GuideStone.org or 1-888-98-GUIDE (1-888-984-8433) Monday through Friday, 7 a.m. to 6 p.m. CT, to speak with a customer solutions specialist.