What's the Difference Between a Credit Report and Credit Score?

When discussing credit, two terms tend to pop up: credit report and credit score. Both are critical for maintaining financial health and are often referenced together, but they serve different purposes. While a credit report shows your credit history (along with some personal details), a credit score is a single three-digit number that represents your credit risk, including how likely you are to pay back debt.

Understanding the difference between a credit report and a credit score can empower you to make smart financial decisions, as this information can play a role in loan approvals, interest rates and even employment opportunities. Let’s look at what makes these credit tools distinct and why knowing the difference can be important for your overall financial well-being.

What is a credit report?

A credit report includes information about your credit history and activity. 

Credit reports usually have several sections, including your identifying information (like your name, date of birth, and Social Security number, and current and past addresses).

Credit reports typically include a detailed account history which encompasses all accounts under your name, including credit cards, mortgages and various types of loans (such as auto loans, personal loans and student loans). The report includes details of the status of each account (whether in good standing or delinquent), the credit limit or loan amount, account balance, account payment history, the date the account was opened/closed and the name of the creditor.

You might find sections about inquiries detailing both hard inquiries (when a lender checks your credit for a loan or credit card application) and soft inquiries (like checking your credit yourself).

Credit reports can also contain any financial-related public records including bankruptcies, foreclosures or liens. They also list collection items, including missed payments, loans sent to collections and information on overdue child support or alimony.

Credit reports are compiled by the 3 main credit bureaus. If you’ve been building credit for a while, you likely have a credit report with each of the bureaus. Each credit reporting agency gathers information from your creditors and other financial sources to compile this report about your credit history. Keep in mind that since credit bureaus may receive different data, your report can vary slightly between them.

What is a credit score?

A credit score is a 3-digit number, typically ranging from 300 to 850, that indicates your creditworthiness. Based on your financial history, it helps lenders evaluate your likelihood of repaying a loan, as well as the interest rate and other terms.

There are several credit scoring models.

Credit scores, currently used in most lending decisions, typically fall into these ranges:

• Poor (300-579): Indicates a high risk for lenders, meaning lenders are less likely to lend or high interest rates
  
  
• Fair (580-669): Still considered risky, but some lenders may approve loans with less favorable terms
  
  
• Good (670-739): Signifies a reliable borrower, typically most loans at reasonable rates would be available to them
  
  
• Very Good (740-799): Shows strong financial health, likely to secure loans with competitive rates
  
  
• Excellent (800-850): Represents minimal risk to lenders, making the best loan terms and interest rates available to them

Each of the several credit scoring models have a unique algorithm; therefore, you may have multiple credit scores that could be referenced by lenders. However, credit scores in general are influenced by 5 primary factors:

The first is payment history. Consistent, on-time payments improve this, while missed or late payments lower it.

Credit utilization ratio measures how much credit you’re using compared to your total available credit. A lower ratio is ideal.

There is also your length of credit history. The longer your credit history, the better, as it gives lenders a clearer understanding of your financial habits.

Your score also considers new credit inquiries. This factor considers the number of recent credit inquiries you’ve had. You get a hard credit inquiry when you apply for a new line of credit, like a loan or credit card. Too many hard inquiries can negatively impact your score.

Finally, credit mix depends on the variety of accounts you hold, such as credit cards, mortgages and student loans.

Credit score vs. credit report: Key differences

Although a credit report and credit score are related, they differ in a few ways. First is the format. A credit report is a comprehensive document detailing your financial activities over an extended period of time. A credit score is a single number derived from the report data.

Another difference is the purpose. The credit report offers a full picture of your credit history, helping lenders assess specific behaviors. Your credit score provides a quick snapshot of creditworthiness, but lenders may still conduct a hard inquiry when determining eligibility and interest rates.

The frequency of updates is another key difference. Credit scores can fluctuate more frequently than credit reports, which are typically updated monthly. However, certain changes such as new loans or late payments can impact both.

In essence, a credit report gives a detailed account of your credit and financial history while a credit score summarizes it in an easy-to-understand number. However, together, they provide a financial profile that can help you understand your borrowing power.

Why are your credit score and credit report important?

Both your credit report and score may have substantial impacts on financial decisions and other circumstances, including:

Lenders rely on your score and report to determine whether to approve a line of credit, including loans. A higher score can improve your chances of a loan approval while a lower score may cause a lender to deny your application. Lenders also use both your score and report to determine interest rates on credit. A higher score can help you secure better rates, while a poor report or score may lead to more costly terms.

For example, imagine applying for a mortgage if you have a low credit score and history of late payments on your credit report. Your chances of being denied the mortgage application are potentially higher, and even if you are approved, you could possibly face a higher interest rate. A strong credit history and high score can increase your chances of approval and lower rate.

Regularly monitoring your report and score can further help detect signs of identity theft early, such as unfamiliar accounts or unauthorized inquiries.

How to check your report and score

Staying informed about your credit is essential, even if you’re not planning on applying for new credit in the near future. There are several ways you can check both your credit score and reports.

If you want to check your credit score, some financial institutions and credit card issuers offer free credit scores, so check if your bank provides this service.

Additionally, you’re entitled to 1 free credit report every 12 months from each of the three credit bureaus. You can access your credit report online.

When looking at your credit report, review it carefully for any errors in personal information, unfamiliar accounts, incorrect payment statuses or unauthorized inquiries. Even a small mistake can impact your credit score, so it’s important to catch any mistakes and dispute inaccuracies as soon as you find them. 

You can check your credit score any time without negatively impacting it. It can be a good idea to check your report regularly to spot any fraud or errors. If you’re planning to make a significant financial decision such as buying a house or applying for a loan, it can be a good idea to check both your report and score beforehand to ensure accuracy.

The importance of monitoring your credit

Understanding the difference between a credit report and a credit score can be key to managing your financial health. Both can be crucial tools in helping you achieve financial goals and protect your personal information. Regularly monitoring your credit report and score allows you to identify areas for improvement and catch potential errors or fraud. The more informed you are, the better positioned you’ll be to make sound financial decisions.

Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.