Credit report vs credit score: what’s the difference?
Credit scores are a numerical representation of past financial performance. You can get information about them in the credit report. Thus, both have almost the same purpose to serve, but they are not the same thing.
When it comes to understanding your creditworthiness, both of them have a role to play. A credit report is a document that provides a complete overview of the credit activities of an individual. It is going to be a detailed track record of the ways a person has handled several payments.
This report is required when you have to know whether your credit scores are good or bad. Reviewing this document from time to time is crucial, or else you might have to face unexpected outcomes like rejection from a lender. Now, when you are aware that you have poor credit scores, you can approach a relevant lender.
Instead of applying with a mainstream lender, you will opt for an alternate lender. Will they be ready to offer bad credit personal loans? Now, that’s a different issue, as affordability will come into the picture.
However, you must note how this awareness about the current status of your credit scores can help you in making the right move, like the above one and correcting the scores. Then, you will not waste a single second and start working on improving your credit scores.
Once your scores upgrade, your credit history will also be enhanced. This will make you eligible for exploring better financial opportunities. Delve deeper to understand how both work differently for you.
What is exactly a credit report?
This is a piece of paper that holds information showcasing whether a person has paid off loans or credit cards within the given deadline. You can say that it is a detailed record of your credit track record.
Now, this is not a random document obtained from a random source. There are prominent credit bureaus who collect details about your finance handling. Then, they document a record which will consist of your credit scores as well.
This report can be referred to investigate your borrowing history, recent inquiries, types of credit accounts you have, etc. Thus, if you have taken out loans or mortgages or have been using a credit card, the credit report will have everything mentioned on it.
One of the prominent aspects that it covers is your payment history. Whether or not you have paid dues on time can be found in this report. Even information about bankruptcy will also be there in the credit report.
The information that is reflected on your credit report is the data that has been gathered from lenders, financial institutions, credit card providers, banks, etc. You must fetch and check your credit report every year, and it is easy as free reports are available at your disposal.
What are the exact credit scores?
These scores are a three-digit number that reveals your creditworthiness. Now, you might want to understand if you have a good or bad credit history. It can be done by following the number range provided for each type of credit score.
You can have good, fair, average, bad and very bad credit scores. It will depend on the range where your credit scores fall. These scores can be derived from your credit report.
Higher scores mean you have better creditworthiness and vice versa. When your credit scores are favourable, i.e. good, you can try out different types of opportunities. Even getting loans from conventional lenders will be possible for you.
Besides, you can avail of better rates with the credit cards you want to get. Prominent financial institutions build algorithms that are used in working out these scores. Strangely, your credit scores might differ according to different scoring models.
The reasons why your scores might go up and down can be known from below.
History of your payments: It is the track record you have created, either by making payments on time or missing them.
Debt amount: This is the amount you owe and is mostly applicable to loans. Besides, it reflects the credit card balance you have in comparison to the credit limits you have been offered.
Span of your credit history: Your old and new credit card accounts will be included. For this reason, you should think twice before closing any of the old credit accounts.
Recent applications: When a hard inquiry is conducted, it shows that you have applied for a loan. Thus, any recent inquiry done will reveal your necessity for recent funds requirement.
Types of accounts you have: You might be handling a variety of credit accounts like loans, credit cards, etc. Each of them can impact your credit scores differently.
How credit reports and credit scores are different?
Once you know what they are, you will be curious to understand how they might be different. Credit scores are a part of the credit report. You are now aware of this aspect already.
Take a look at the points that are different.
Nature
As you know, a credit report comes in the form of a document. On the other hand, credit scores are a few numbers that can disclose a lot about your financial history. By taking a glance at them, you can understand whether your financial state is stable or unstable.
Utility
Credit reports are necessary when you have to conduct a detailed analysis of your financial condition. In contrast, credit scores let a lender get a quick understanding of your credit history. Thus, not always, credit reports should be fetched when knowing the credit scores would be enough.
The bottom line
Should you check your credit report while getting very bad credit loans? Yes, maybe you have not monitored your credit scores so far. This is the reason why they have worsened so much.
If you had checked them on time and regularly, you could have taken the necessary steps to prevent this disaster from happening. You might have worked on responsible issues to try to improve credit scores.
Here, you must know that getting better rates and terms of repayment is effortless when you have favourable credit scores or credit history. Keep analysing your credit report once a year and your credit scores from time to time.