Credit Score Or Credit Report – What’s The Difference?
We often get the question, “What’s the difference between a credit score and a credit report?”. There is a significant difference between the two and it’s important that you know the difference and understand what each can do for you and your family. Failing to understand your credit score and how it works can put a dent in your financial life.
What Is A Credit Score?
A credit score is a numerical expression derived from a statistical analysis of a person’s credit files. A credit score is used to represent the creditworthiness of that person, which is the likelihood that the person will pay his or her debts in a timely manner. A credit score is primarily based on credit report information which is typically sourced from credit bureaus/credit reference agencies. Higher scores are considered better.
This system was developed by lenders, such as banks and credit card companies who use credit scores to evaluate the potential risk posed by lending money to people and to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. Other organizations, such as mobile phone companies, insurance companies, employers, and government departments have begun to employ the same techniques.
What Is The Difference Between A Credit Score And A Credit Report?
A credit report contains all of the detailed information in a person’s credit file maintained by a Credit Bureau. Think of it as an accumulation of information about how you pay your bills and repay loans, how much credit you have available and what your monthly debts are that could be provided by the Credit Bureau in a consumer report to a third party, such as a credit card company or a lender.
The data in a credit report is interpreted through a complex mathematical process to determine a credit score, which is a single number. Credit scores commonly range from 300 to 850.
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