What’s the Difference Between a Credit Score and a Credit Report?

You’ve heard the terms credit report and credit score, but do you know the difference between the two?

What is a Credit Score?

A credit score is a number associated with a person’s credit files to indicate their creditworthiness. Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers. Lenders use credit scores as one of various factors in determining who qualifies for a loan, at what interest rate, and at what credit limit. Private companies use special computer programs to determine your score based upon a matrix of factors.

What is a Credit Report?

A credit report contains more detailed information than a credit score. It’s a record of your bill payment history, loans, debt, and other financial information. Credit reports also list employment, legal, and bankruptcy information. The information listed on your report will in turn affect your credit score. Negative listings, such as a car repossession, can remain on your report for up to seven years.

When Should I Check My Credit?

It’s important to check both your credit report and credit score regularly. If you are looking to secure credit for a mortgage, car loan, or personal loan, it is very important for you to get copies of your credit report and check your credit score BEFORE you apply for new credit. When you request your own credit report, it is considered a “soft inquiry” and your credit score will not be affected negatively. Always check your credit reports and scores before you apply for new credit.

You can obtain one free credit report from Transunion, Experian, and Equifax every twelve months.