Credit Score vs Credit Report?

So what is the difference between a Credit Score and a Credit Report? This is a good question asked by many newcomers who are confused by these similar but different meaning terms. A credit report contains all of the detailed information in person’s credit file maintained by Credit Bureaus. Think of it as an accumulation of information about how you pay your bills and repay loans, how much credit you have available and what your monthly debts are that could be provided by the Credit Bureau in a consumer report to a third party, such as a credit card company or a lender.

Credit score on the other hand is the result of data from a credit report being fed as input through a complex mathematical algorithm which interprets the data and outputs a credit score, which is a single number. Credit scores commonly range from 300 to 900.

Americans are entitled to one free credit report within a 12-month period from each of the three credit bureaus but are not entitled to receive a free credit score. In Canada where credit scoring is done in a similar fashion on the most part, there is one important difference, Canadians may order a free copy of their credit report any number of times in a year, not just once, as long as the request is made in writing, and as long as the consumer asks for a printed copy to be delivered by mail. The request is noted in the credit report, but it has no effect on their credit score.

What is a Credit Score?

In the simplest terms a credit score is a number which represents your credit trustworthiness, a trust rank, a measurement of risk factor assigned to you in the finance world. It represents the likelihood that you the consumer will pay your bills and on time. Credit score is designed in order to help credit lending institutions such as banks, credit unions, and credit card companies make better lending decisions by evaluating potential risk posed by lending money to a consumer and to avoid losses due to bad debt.
Whether a person, or a corporation, an entity’s credit score, is a number, derived from ones credit history and its current financial situation, describing consumers ability to pay off credit.

Wikipedia describes credit score as a “numerical expression based on a statistical analysis of a person’s credit files, to represent the creditworthiness of that person. A credit score is primarily based on credit report information, typically sourced from credit bureaus.”

It’s worth noting that credit scoring is not limited to banks. Other organizations, such as mobile phone companies, employers, landlords, insurance companies, car dealerships, government departments, and virtually anyone exposed by making loans, employ some sort of credit scoring techniques whether propitiatory or ones provided by credit bureaus.

Good Credit Score vs Bad Credit Score
Those with a good credit score like any relationship where trust is not broken can count on certain rewards, like more favorable financing arrangement, lower interest rate for home mortgage or car loans, higher credit card limits. Little luxuries and conveniences like that which help in getting ahead and making financial decisions, a little smoother, while having big impact later on. Bad credit score on the other hand means tighter circle of options, and inevitably higher interest rates. It is easier to slip from good credit to Bad credit rating than building back credit score trust, that is why it is essential to monitor your credit score situation and ensure you maintain in good standing.

What is a Credit Report?

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But What exactly is a Credit Report? Read more