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The Difference Between a Credit Report and a Credit Score

On Behalf of | Sep 12, 2016 | Consumer Protection

If you don’t understand the difference between a credit report and a credit score, you are not alone.  While both are a measure of your financial wellbeing, your credit report is a history report of how you have handled your debts, both past and present, and your score assigns a number to that history.  Financial experts compare your credit report and credit score to a report card and grade point average.  The report card shows your classes and assigns a grade to each class based on your performance and the grade point average takes your grades and calculates a number.

Your credit report and credit score go hand in hand but they are different and are used for different purposes.  A credit report is a record of your credit history from a number of different sources with which you maintain accounts, including banks and credit card companies.  A credit score is a calculated number applied to your credit report that measures your credit risk based on the information in your report.  The report is run through a mathematical equation, like a report card, and a number is the result.

Credit reports are compiled mostly by the three major credit reporting agencies (Experian, Equifax and Trans Union) gathering and storing your financial information from sources.  Though we have discussed in blogs and on our website the various other agencies and scores.  Your credit score is calculated by running that report through a complicated equation that was created by companies like FICO (Fair Isaac Corporation) or VantageScore. Sometimes banks create their own scores.  Each credit reporting agency has a single report for every consumer but a consumer may have as many as 60+ scores from each company. That is because each credit industry has its own score weighing certain factors in your credit history differently.

Credit reports give a detailed history of your accounts, both past and present and show a list of lenders who have looked at your report.  Your credit report shows a list of all of your accounts, the date they were opened, your payment, and balance history.  Your credit score uses five factors found in your report to calculate your score.  These factors include payment history, balance owed, length of credit history, new credit, and type of credit.  While each factor is important, they are not equally used when calculating your score.  For instance, the most popular FICO scoring model attributes 35% of your score to payment history, 30% to balance owed, 15% to length of credit history, 10% to new credit and 10% to the type of credit.  Different scoring models may weigh the five factors differently.

For more information on the difference between your credit report and credit score contact SmithMarco P.C. for a completely free case review.