Confused about credit scores and credit reports? You're not alone.
A large portion of the American population is dealing with misconceptions about credit. For example, 11% of people thought you started off with a perfect credit score. And nearly half of those surveyed didn't know bad credit limited your access to cell phone services.
While you don't need to be a credit expert to establish and/or improve your credit health, you should have a basic understanding. So in this article, we're going to discuss the difference between a credit report and a credit score.
The simple answer -- yes. The two may play a major role in determining your credit-worthiness, but these roles are entirely separate.
So what is the difference between a credit report and credit score? Here's a simple breakdown:
There are three major credit bureaus used to collect data about Americans' ability to repay debts. You can pull your personal credit report from any one of the credit bureaus, which will show things like:
This data is then used to determine your personal FICO® credit score. That’s why it’s important to ask questions about what’s on your credit report. Understanding the factors that impact your credit report is crucial to maintaining healthy credit. Read here to learn how to read your credit report so you can work toward better credit.
Note: Closed and delinquent accounts remain on your credit report for 7 to 10 years. After this point, they are removed from your credit report, unless reopened again by the creditor (for collection).
Not to make the topic any more confusing, but there are several credit scoring models lenders use to identify your credit rating. For example, you have FICO® Score 8, VantageScore, and several others. So, if you’re wondering, How often does your credit score update?, the answer often depends on the credit scoring model.
But they all use the same information from your credit report when calculating your credit score. The difference is in how each model weighs each of the factors. Here's a look at FICO's credit scoring model:
You're able to see this information on all three of your credit reports (Transunion, Equifax, and Experian), but you won't find a consumer credit score. Each credit scoring model has a different credit score range and rating. For example, FICO measures your score from 350 to 850
Note: Credit scores and credit reports are not the same. Credit reports collect your debt and payment history, while your score is a calculation (or grade) of how great your credit report is.
Based on the factors above, you may have a better understanding of how your credit rating is calculated. The key is to improve all areas of your credit report to obtain the highest score possible.
When you first start out, you won't have a consumer credit score, which means you'll need to start from scratch. If a lender were to pull your credit report, they'd get a notice stating your credit file is too thin (meaning there's little to nothing on it). And because of this, you won't have a score yet.
Here's a look at some of the things you can do to build your new credit:
Learn how to build your credit health here.
Knowing how to access your credit report and credit score is critical to establishing and building your credit. You'll need to keep an eye on what's been reported on your personal credit report and how it's affecting your score.
This should lead you to ask important questions like “What factors affect credit score?” or “Can you get late payments removed from credit reports?” Understanding how these impact your credit report and score will be critical in building up your credit.
Your credit score can change several times throughout the month, based on your credit activities (payments, new account opens, credit inquiries, etc.). Viewing your credit report is also necessary to find errors, such as accounts that don't belong to you.
If you do find errors upon running a credit check, you'll need to dispute them for removal or correction.
So how can you access your credit report and credit score?
Well, you have an opportunity to view your credit report for free by requesting them from each of the credit bureaus. You can access your free credit report once a year with Experian, Transunion, and Equifax. To do this, visit annualcreditreport.com.
You can also use services that allow you to check your credit report more regularly. But, as opposed to an annual credit report, you may have to pay a fee to view your file more frequently.
But what about your credit score?
If you want to access your credit score, you'll have to either:
As you begin (or continue) your journey to good credit, be sure to conduct research. By empowering yourself with credit knowledge, you'll be on track to improving your score and one day financing a home, car, or that dream vacation you always wanted.
_Need to build your credit? Self provides a step-by-step credit building process that could help. Learn more at Self.inc _
Saphia Lanier is a content writer with 14 years of experience writing on topics relating to SaaS, marketing, SMBs, and business/personal finance. See her on Linkedin.
Lauren Bringle is an Accredited Financial Counselor® with Self Financial– a financial technology company with a mission to help people build credit and savings. See Lauren on Linkedin and Twitter.