What’s The Difference Between A Credit Score And A Credit Report?

Your credit score is one of the most important indicators of financial health since it can be used in determining a host of financial decisions, including whether or not you qualify for a mortgage, the interest rate you receive for a car loan, whether or not you can open up a new credit card right now and even whether you’ll be approved for the apartment you applied for.

There’s a lot to know when it comes to credit scores and although they sound similar to credit reports, they’re not the same. However, understanding how they both work can help you figure out what habits will help you keep your information safe and become as creditworthy as possible.

Below, Select breaks down the differences between a credit score and a credit report and how you can check them both.

A credit report is a record that contains information about your credit activity and history of managing debt. The information also includes your payment history and balances on credit cards, loans and other forms of debt, and it’s all gathered from the three credit bureaus: Experian, Equifax and TransUnion.

Beyond this, your credit report can also include information on late payments, closed accounts and delinquent accounts. It can also show your oldest accounts, recently opened accounts, bankruptcies and foreclosures. When you apply for a personal loan, mortgage, car loan or a new credit card, lenders use the information on your credit report to determine your creditworthiness (or, how likely you would be to repay a new debt).

Your credit report may seem a bit intimidating considering it feels like it’s baring so much of your credit history and activity. But knowing what’s in your credit report can also help you spot potential instances of fraud. If you see a recently opened line of credit or loan account that you didn’t open yourself, this is something you’ll want to bring to the attention of the credit bureaus since it could be a sign that someone has used your personal information to open those accounts in your name. You wouldn’t want to be responsible for any bad credit activity (like missing payments or maxing out your credit limit) and you also wouldn’t want to be denied for future lines of credit because of it.

You may even consider signing up for a credit monitoring service, which Experian offers for free. The service gives you access to updated credit scores, spending alerts and alerts when there are new credit inquires and new accounts have been opened. And, it allows you to submit and track any disputes you make about inaccuracies on your credit report. If you want something more comprehensive, consider  IdentityForce®, which also comes with identity theft insurance and dark web monitoring.

Big inaccuracies on your report may be bringing down your credit score, which can have large ramifications such as not being able to qualify for lower interest rates on loans and (in extreme cases) not being able to qualify for lines of credit from certain lenders altogether.

So as daunting as it may sound, taking a look at what’s on your credit report is a strong first step to understanding a big part of your financial picture.

A credit score is a three-digit number that represents what’s in your credit report. You actually have more than one credit score since scores are calculated using a variety of different scoring models, which each have their own algorithm and their own uses.

The most popular scoring model is known as the FICO score model and it’s used in 90% of lending decisions. Another popular model is known as the VantageScore model, and at times you may notice that one score is higher or lower than the other — that’s just because the scoring algorithms are different.

Of the three credit bureaus, Experian reports your FICO 8 score and Equifax and TransUnion report your VantageScore. That’s not to say that you should only look at the score reported by Experian since it gets used the most. It’s still helpful to keep an eye on your Equifax and TransUnion scores since a lender may opt to look at your VantageScore instead.

Your credit score typically ranges from 300-850 and is divided into different ranges.

For the FICO score model, the ranges are:

• Very poor: 300 to 579
• Fair: 580 to 669
• Good: 670 to 739
• Very good: 740 to 799
• Excellent: 800 to 850

And for the VantageScore model, the ranges are:

• Very poor: 300 to 499
• Poor: 500 to 600
• Fair: 601 to 660
• Good: 661 to 780
• Excellent: 781 to 850

As you can see, the ranges can have pretty dramatic differences, which is why it’s important to look at credit scores from both models. Generally, the higher your credit score, the more likely you are to get approved for credit cards and loans with lower interest rates (so you can save money on your monthly payments) and overall better terms.

Sometimes, a low credit score can also make you ineligible to apply to a new line of credit altogether. That’s another reason why it’s important to make sure you know what your credit score is before you apply to a financial product (or even to a lease for an apartment!) that only accepts good or excellent credit.

In addition to the scoring algorithm, there are five main factors that are accounted for in your credit score.

1. Payment history (35%): Whether you’ve been making on-time payments every month for each of your open credit accounts. Of the five factors, payment history makes up the largest portion of your score.
2. Amounts owed (30%): This is the total amount of credit and loans you’re using compared to your total credit limit, and is also known as your utilization rate. A lower utilization can contribute to achieving a higher credit score. Experts generally recommend aiming for a utilization ratio of no more than 30% (i.e. if you have $10,000 in credit available to you, don’t use more than $3,000).
3. Length of credit history (15%): This is the average amount of time you’ve held open credit accounts. The longer you’ve kept an account open, the higher your average age of credit and the higher your credit score may be.
4. New credit (10%): This accounts for how often you apply for and open new accounts.
5. Credit mix (10%): The variety of credit products you have, including credit cards, installment loans, finance company accounts, mortgage loans and so on.

There are a few things you can do in each of these areas to make sure you’re putting forth good credit habits to boost your score as much as possible.

For example, if you’ve never held a credit account you’ll want to start building your credit as soon as possible; don’t wait until you’re ready to apply for a mortgage or car loan or other loan for a big ticket purchase because insufficient credit history won’t provide lenders with enough clues about your creditworthiness.

Instead, you might consider opening a secured credit card, like the Discover it® Secured Credit Card or the Discover it® Student Cash Back (if you’re a student and this is your first credit card). These cards come with no annual fee and they’re meant for people who need to start building their credit.

And while taking on new lines of credit can help your credit score, you want to be careful about when you submit new credit applications. This is because every time you submit an application for a new line of credit, the lender opens up a hard inquiry on your credit report, which can cause it to take a temporary hit. Applying for too many new lines of credit all around the same time can have a negative impact on your credit score, so make sure you plan ahead when deciding when to apply for that new credit card or when taking out that debt consolidation loan.

You can check your credit report for free once every 12 months by going to the Annual Credit Report website, however, because of a rise in credit fraud since the COVID-19 pandemic, you can access free weekly reports from all three credit bureaus through April 2022.

You can also sign up for Experian to view your FICO score and report and credit scores from the other two bureaus as well. Capital One also offers free credit monitoring through CreditWise® from Capital One.

If you want a more comprehensive service, check out Select’s ranking of the best credit monitoring services.

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For rates and fees of the Discover it® Secured Credit Card, click here.

For rates and fees of the Discover it® Student Cash Back, click here.