As credit becomes increasingly more difficult to come by, more and more Americans are becoming concerned with their credit rating. It’s hard to watch a single day’s worth of television without hearing ads for free credit scores, or services that will monitor credit reports. While credit scores and credit reports share some similarities, they are not the same.
The credit report is the backbone of your credit rating. In the credit report, you’ll find basic information like what address they currently have for you, as well as any previous addresses that you have used. You’ll also find a listing of any bank accounts, credit cards, and large loans (with their corresponding balances and limits). Further, the credit report will say how many on time payments you have, any late payments, delinquencies, bankruptcies, and the like. Finally, it will also tell you how many times your credit report has been accessed, whether by a “hard pull” or a “soft pull”. Soft pulls can be any general inquiry to your credit. For instance, you pulling up your own credit report will count as a “soft pull”. However, a mortgage lender doing a detailed review will generally call for a “hard pull”.
Credit reports are handled by three independent credit reporting agencies: Experian, Equifax, and Transunion. Each credit reporting agency will have their own rules and guidelines and maintain their own records. If you find errors on your credit report, you’ll have to take it up with the agency that issued the report. While your credit report will generally be the same amongst the three agencies, due to timing differences they are not the same. Each agency will also issue it’s own credit score.
The credit score is a by-product of your credit report. Your score is based on several factors included in your credit report, for instance the ratio of debt to available credit. Any late payments, bankruptcies, or the like will negatively impact your credit score. Things like long credit histories and low debt will in turn help your credit score. Each agency issues you a credit score, but if you’re looking for your FICO score you still don’t have it yet.
FICO is trademarked by the Fair Isaac corporation. The FICO score is a combination of all three of your credit scores from each of the agencies. How the FICO score is actually calculated, your guess is as good as mine. This is an important distinction though – if any company other than Fair Isaac promises you a credit score, it’s not the real thing. This is commonly referred to as the FAKO score. While FAKO scores are generally cheaper than FICO scores, they will merely give you an estimation of your FICO score. Lenders will usually only look at the FICO score.
Good credit is important for many reasons. If you’re looking to buy a house, get a car loan, or even find employment, a good credit score can only help you. Now that you know the difference between a credit score and a credit report, you’re well on your way to getting a great credit score.
