What’s the Difference Between Credit Reports and Credit Scores?
A credit report and a credit score are two distinct products that give different information to prospective lenders; nonetheless, they are both closely connected.
Credit reports are thorough records of a person’s financial activities over a long period of time, including payment activity (or lack thereof), account limits and use, account ages, and account kinds. In essence, it gives lenders a snapshot of the consumer’s previous financial responsibility, which is typically a solid predictor of future performance, or risk. Your credit report may also contain information about your home, employment, foreclosures, tax liens, and financial judgments.
Credit Score vs Credit Report
A credit score is a snapshot of a snapshot. If a credit report is a picture of an individual’s borrowing and financial health, a credit score is a snapshot of a snapshot. Credit scores, which are a numerical representation of the information included in a consumer’s credit report, are used by lenders and others to assess a prospective customer’s risk in order to decide if credit will be granted and, if so, at what rate.
The FICO score, which is used by most lenders, is a number that ranges from 300 to 850 and was designed by the Fair Isaac Corporation (FICO) to assist lenders in rapidly estimating the possibility that a customer would fulfill his or her responsibilities and pay their bills on time.
Consumers may choose from a variety of credit scores, which can be divided into two categories: official FICO ratings and everything else. The second form of the score is known as an “educational” or “consumer” score, and it’s not the same as a FICO score.
When it comes to obtaining credit, the official FICO score is the more crucial of the two. Creditors and lenders utilize the FICO score to make credit decisions, whereas educational scores are often made accessible to consumers via third companies like Credit Karma, Credit Sesame, Quizzle, and others.
In general, if you can get a free credit score without having to enter your credit card information at a site like Credit Karma, the credit score you get will be one of the many distinct kinds of educational scores.
The information in your credit report is used to create both sorts of scores. Different aspects of your credit history, such as total debt, duration of credit history, kind of accounts you have, and account age, all contribute to a percentage of your overall credit score.
Your FICO score is influenced by your income as well as your work history. These factors aren’t usually taken into account while calculating educational scores.