We often talk to clients who are confused about the difference between their credit reports and their credit scores. It’s easy to see why a consumer might be confused about these two different information sources, since both are tools used by creditors when deciding whether to grant credit.
A credit score is not the same as a credit report, but either or both can be used by potential creditors to determine whether they will extend credit to you as a consumer. Your credit report is all of the compiled information about your credit history, made up of information reported by your current or past creditors. Your credit score, on the other hand, is a commercial analysis of all of the available information. Lenders generally pay a company to determine a consumer’s credit score, then use that information to make a credit decision. In some cases, consumers can pay the same companies to view their own credit scores.
A credit score is a determination of your creditworthiness based on a number of factors, most of which come directly from the information in your credit report. Different companies compile information into scores in a variety of ways to be most useful for their particular purpose. For example, one of the most popular credit scores available, FICO, looks at a mix of factors, but relies heavily on on-time payment history and utilization ratio to come up with a score between 250 and 900 with 900 being a perfect creditworthiness rating.from the data in your credit report. There are many different types of credit scores. Some specialized
scores are used for particular industries, such as insurance underwriting or mortgage lending. Generally, a credit score is an attempt to predict how likely a consumer will pay back a loan as agreed.
For more information about what’s in your credit report, check out this previous post.