Your credit score and credit report can help you make sense of your overall credit history and get a better understanding of your creditworthiness. Both can illustrate what kind of borrower you are, which is why they're used by lenders to determine whether or not to extend you a line of credit, like a credit card.
However, the two aren't the same. Here's what you need to know about the differences between your credit score and credit report.
Credit score vs credit report: the takeaway
- A credit score is a three-digit number that provides a quick impression of your overall creditworthiness. A credit report documents your loans, credit cards, mortgages and other accounts, as well as payment history.
- Your credit score and credit report are important for your financial security and freedom. Having a clean report and a high credit score will make getting a mortgage or other loan easier and usually, significantly cheaper.
- Check both your credit score and credit report regularly. Look for errors in your report. Try to boost your credit score by paying attention to the factors that make up your score, like paying your bills on time.
A credit report is a document that summarizes your overall credit history, provided by each of the three credit bureaus: Experian, TransUnion and Equifax. These bureaus base their reports on information from lenders with whom you have done business.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Your credit report includes personal information, open and closed lines of credit — mortgages, credit cards, personal loans, etc. — payment history, delinquent payments, accounts in collections, public records like liens or foreclosures and the number of times you’ve applied for a line of credit. It’s what lenders see when determining whether or not to loan money to you, as well as what interest rates you receive. And it’s also used to determine your credit score.
Because of this, it’s important to be proactive and regularly check for errors on your credit report. You may be surprised at how common it is to find a mistake. According to a survey by Consumer Reports, 44% of those who successfully checked their credit report said they found at least one mistake in their credit reports. And these errors can have significant impacts on your financial health. It could be the difference between being approved or denied for a line of credit, like a mortgage or car loan, and could result in unnecessarily high interest rates or APRs on loans you are approved for.
Therefore, it’s important to perform regular “credit checkups” to ensure that the information on your credit report is accurate. And it’s easy to do. You can get a free weekly credit report from Equifax, Experian and TransUnion on AnnualCreditReport.com.
If you do discover an error, such as the presence of a credit card or loan you never opened, file a dispute with the credit reporting company. Explain in writing what is incorrect and provide documents to support your claim. The Consumer Financial Protection Bureau (CFPB) even has a template letter you can use as a guide.
Credit score
Your credit score is a three-digit number indicating your overall creditworthiness. It’s a snapshot of your overall credit health and is calculated using the information in your credit report. A credit score is an easy way for lenders to determine whether or not you’re a risky borrower and how likely you are to pay back your loans on time.
Two main companies provide credit scores — FICO and VantageScore. Since 90% of lenders use FICO Scores to make lending decisions, however, this score usually gets more attention, although lenders can use both scores to make decisions. Both scores range between 300 and 850, with a lower score indicating poor credit and a higher score indicating excellent credit.
FICO Score:
- Poor: 300-579
- Fair: 580-669
- Good: 670-739
- Very Good: 740-799
- Exceptional: 800-850
VantageScore:
- Very Poor: 300-499
- Poor: 500 - 600
- Fair: 601-660
- Good: 661-780
- Exceptional: 781-850
How is my credit score calculated?
Five main factors go into determining your credit score.
Payment history: Payment history is the largest factor affecting your credit score, accounting for 35% of your total score. For this reason, having a history of consistent on-time payments is crucial. Just one missed payment can significantly decrease your score.
Credit utilization: Credit utilization is the ratio between any debt you have compared to your total credit limit, and it makes up 30% of your overall credit score. The lower your credit utilization ratio, the better, but a good rule of thumb is to keep your credit utilization below 30%.
Length of credit: A longer credit history shows you’ve had a consistent track record of paying back debt.
Credit Mix: By having both installment and revolving loans, you show lenders you can manage different kinds of payments.
New credit: Having several “hard pulls” on your credit report from opening new credit accounts around the same time can lower your score.
Not only are you more likely to be approved for loans and credit cards with a good credit score, but you’ll be able to score the best rates possible, which can save you thousands of dollars over the life of a loan. For example, raising your credit score can lower your mortgage rate, resulting in savings of over $130,000.
Related Content
-
What 401(k) Savers Near Retirement Can Do Amid Market VolatilityWhether retirement is years away, a year or two out, or in the rearview mirror, here's how to handle uncertainty in your 401(k).
-
The New Space Age Takes OffThe Kiplinger Letter From fast broadband to SOS texting, space has never been more embedded in peoples’ lives. The future is even more exciting for rockets, satellites and emerging space tech.
-
Home Insurance: How to Cut Costs Without Losing CoverageNatural disasters are causing home insurance premiums to soar, but don't risk dropping your coverage completely when there are ways to keep costs down.
-
Why Homeowners Insurance Has Gotten So Very ExpensiveThe home insurance industry is seeing more frequent and bigger claims because of weather, wildfires and other natural disasters.
-
Zelle App Shut Down? Why Zelle Has Discontinued Its AppWith the Zelle app shut down, learn how you can still use Zelle and which other mobile payment apps you might want to consider.
-
Use This 1-Year CD if You’ll Owe Taxes Next YearA one-year CD allows you to set money aside now for taxes you'll owe next year. We'll show our best choice.
-
How to Lower Home Insurance Rates When Climate Change Increases CostsA top insurer warns the damage climate change causes is making it cost-prohibitive for insurers in some areas. Learn how to protect your home and lower costs.
-
Stick to the Plan: Don't Panic During Economic UncertaintyTake a breath and step back. Focus on a solid fiscal foundation to stabilize your investments during stock market volatility.
-
How Inflation Affects Your Finances and How to Stay AheadThe cost of goods and services is certain to rise over time, making it essential to have a financial plan that will help you keep pace.
-
Now's a Great Time to Become a Financial Adviser: Here's WhyThere's a growing need for financial advisers. Why not take on a role that offers earning potential and work-life balance and helps change lives?
