What is the Difference Between Credit Report and Credit Score?

People get confused and often use credit report and credit score as if the were the same thing. This is not true. They are both related to your credit history but are two different aspects. Each has the possibility of affecting your application for a loan. You can get your free credit report and it is free if you follow correct procedures but the free credit report does not include your credit score.

Your credit report is a history of all your past financial dealings. It includes all your past payment history, good and bad, your total debt and other pertinent information. This is the information you get when requesting a free credit report. Your credit score is like a grade. It is a number that indicates how risky you are and is used as a method to determine how likely you are to repay any loan you are applying for.

Your credit history is maintained by three national credit bureaus that provide your free credit report. A single bureau report is a report from one of these three and a 3-in-1 report provides the most comprehensive report because it is a combination of all three records.

The three national bureaus are Equifax, Experian, and TransUnion. They keep basically the same information with some minor differences in what they record. When you apply for credit, the potential lender is permitted by law to check your credit report. They use this information to determine if they will give you the loan and also to determine what interest rate to apply. You can see the information is important and you need to know what is contained in your report. Your free credit report will keep you abreast of your situation.

Credit scores are also important. This gives the potential lender a quick method to determine your ability to pay the loan back for which you have applied. Using the information in your credit report and applying any number of calculating methods determine your credit score. The theory behind the calculation is that your past payment history and your current financial situation will indicate your future ability to pay off the loan. A higher score indicates you are more trust worthy in financial manners. Your credit score is not available free through your free credit report. You will have to pay to get your score.

Credit scores are subject to change daily as your financial situation changes. Some get caught up in the scores and want to try to raise their score. If you do not worry about trying to raise the number and instead do the things that make good credit sense like paying bills on time and keeping your indebtedness to a minimum, the number will take care of itself.

It is important that you keep informed about your credit history and a good way to keep informed is through your free credit report.