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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand. |
Credit reports and credit scores may sound like the same thing, but they are not and you need to understand the differences. Let's take a look. Credit Reports and Credit Scores Are Not the Same Thing By Britt Erica Tunick Many people think credit reports and credit scores are essentially interchangeable, but nothing could be further from the truth! Any kind of credit you take out from mortgages and home equity loans, to credit cards and even utility accounts like gas and electric is reported to the three major credit monitoring agencies. Your individual credit report documents your credit history and includes information from your social security number, to your address and the dates any loans or lines of credit were started, as well as how much you still owe on a loan or how much you have the potential to borrow through a line of credit. Other information that can be found on your credit report includes how promptly you pay your bills, whether you have ever been reported to a collection agency for failing to pay your bills and whether you have ever reported bankruptcy or have any court judgments or tax liens against you. Put simply, a credit report is a play by play history of your credit activities. Whereas your credit score, known also as a FICO score, is the three digit number derived from the information in your credit report designed to give lenders an idea of what kind of financial risk they would be taking by lending to you and how likely you are to pay your debt in a timely manner. Credit scores range from 300 to 850, with anything below 700 raising a red flag for lenders making it likely any credit they provide you will come with less than optimal interest rates. Credit scores are generated through a complex, pre-determined equation that takes into account everything from any late payments, to the total amount you owe, the total amount you have the potential to borrow through open lines of credit and even how many requests have recently been made for your credit score. Multiple queries lower your overall score. Unlike your credit report, which you are legally entitled to request a free copy of each year from each of the three major credit tracking agencies, unless you get your credit score from a bank or an organization pulling it for a potential loan, you may have to pay to get a copy of your credit score. |
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