Personal finance experts agree that staying on top of your credit report and score is an essential part of your financial health. But while credit reports and credit scores are related financial instruments, they are not the same thing.
One easy way to understand the difference between the two is that your credit score is a number that is assigned to you based on your personal financial history as reflected in the items listed in your credit report. So, if you have a good credit report, you will generally have a good credit score. The converse is also true — a bad credit report reflecting such negative elements as late bill paying, excessive indebtedness, and/or legal judgments will result in a low credit score.
Your credit score is a numeric value that is assigned to you by one of the three major credit reporting agencies (TransUnion, Equifax and Experian) based on your credit history as itemized in your credit report. Credit scores are ranked along a relative scale ranging from 300-850 for TransUnion, 280-850 for Equifax, and 360-840 or 330-830 for Experian (based on which ranking metric is used). Additionally, the FICO score calculated by Fair Isaac Corporation and used by many lenders in determining credit risk uses a scale of 300-850. Bottom line is you want to be in the top credit score range, with scores of 720 or more generally considered to be a good credit score.
The metrics used by the reporting bureaus to calculate your credit score are as follows (together with the approximate percentage each metric counts toward determining your overall score):
A higher credit score will help ensure that you have access to financial products with the lowest fees and the best borrowing rates.
While the credit score consolidates all of your financial information and assigns you a specific number on the relative credit scale, the credit report itemizes personal details about your current economic situation and prior financial activities in one multipage report.
Credit reports contain detailed information about your financial life such as:
The items listed in your credit report direct affect the determination of your credit score. Check the information carefully, as reporting errors can have a negative effect on your personal financial profile and result in a lower credit score.
Personal finance experts recommend that you review your credit report and score regularly so you can find potential errors before they cause you to pay more for credit, have your application denied or otherwise suffer economic harm. Unrecognized items on your credit report may also indicate that your personal data has been compromised or that you may be a victim of identity theft.
Your financial health requires that you check your credit score and report regularly. The credit score vs credit report distinction is less important than that you review them both. Your financial well-being depends on it.
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