What Is the Difference Between a Credit Score and a Credit Report?

What Is a Credit Report?

A credit report is a record of your debt management history compiled by one of the three national consumer credit bureaus (Experian, TransUnion or Equifax). Credit reports reflect your history of borrowing money using loans and credit cards, and your repayment of those obligations.

A credit report lists current and past debts, and details monthly payment history for loans and credit cards that are currently active and well as loans you've paid off in full. Payment histories reflect whether your payments were made on time, as agreed in your loan agreement, or whether they were made 30, 60 or 90 days late.

If you've filed for bankruptcy, had a delinquent account turned over to a collection agency, a car repossessed by a financing company, or a home foreclosed by a mortgage lender, those events may be reflected in your credit report as well.

What Is a Credit Score?

A credit score is a three-digit number lenders use to help decide how likely they are to be repaid on time if they give a person a loan or a credit card. Complex statistical software known as a credit scoring model generates a score by analyzing the historical data in your credit report.

There are many credit scoring models, but the most common ones, the FICO^® Score^☉ and VantageScore^®, produce scores ranging from 300 to 850. Lenders consider individuals with higher credit scores more likely to repay their loans, and those with lower credit scores at greater risk of nonpayment.

The calculations used by the FICO^® Score and VantageScore models are closely guarded trade secrets, but these factors, ranked in importance by the makers of the FICO^® Score, are highly influential on all commercial credit scores:

• Payment history: Timely payments are the most important contributor to a good credit score, and even one missed payment can have a negative impact on your score. Lenders want borrowers who will make payments reliably, on time, every month. Payment history accounts for 35% of your FICO^® Score.
• Credit utilization: Your credit utilization ratio is the percentage of your available revolving credit you're using at any given time. If you're using more than about 30% of your available credit, lenders may see you as a higher-risk borrower, so utilization ratios higher than that tend to bring credit scores down. Generally, the lower your credit utilization, the better. Credit utilization is a big factor in a category that accounts for 30% of your FICO^® Score.
• Length of credit history: Lenders value borrowers with experience handling debt responsibly so, generally, the longer your credit history, the higher your credit scores. The overall age of your credit accounts makes up 15% of your FICO^® Score.
• Credit mix: People with top credit scores often carry multiple credit accounts, including a car loan, one or more credit cards, a student loan, a mortgage or other credit products. Credit scoring models view a diversity of accounts as a sign you can manage a range of credit products and multiple monthly bills. Credit mix accounts for 10% of your FICO^® Score.
• New credit: The number of credit accounts you've recently opened, and the number of credit checks, or hard inquiries, lenders have made in connection with your recent credit applications, account for 10% of your FICO^® Score. Too many new accounts or inquiries can indicate increased risk, and as such can hurt your credit score.

The presence of a major negative event such as bankruptcy, foreclosure or repossession in your credit report can also hurt your credit score significantly.

Because credit scores are numerical distillations of your credit report, lenders often use them as a first step in their review of loan and credit applications. For instance, many lenders will not do business with applicants whose credit scores fall below a specific minimum, or cut-off. Each lender sets its own cut-off, depending on the types of loans it offers and its willingness to accept risk of non-payment.

Lenders also use credit scores to help determine the interest rates they charge. They typically charge higher interest rates to borrowers with lower credit scores because, as a group, they are statistically more likely to cost the lender more in loss-recovery efforts than borrowers with higher credit scores. Lenders usually reserve their lowest-available rates for applicants with very good to exceptional credit scores.

Who Sees Your Credit Reports and Credit Scores?

When you apply for a loan or credit card, it's common for your lender to do a credit check, where it reviews one or more of your credit reports and perhaps credit scores based on them. Credit checks can also occur under other circumstances, such as when you apply to rent an apartment, when you take out a car insurance policy, or when you apply for certain jobs.

Under federal law, access to your credit reports and, by extension, to credit scores based on them, is limited to certain authorized entities, who may only view your credit information with your permission. These include lenders with whom you've applied for a loan or credit card; credit card issuers with whom you maintain open accounts; landlords screening applicants for home or apartment rentals; employers conducting pre-employment background checks; and auto insurance companies (in some states).

Loan and credit card applications typically grant lenders permission to obtain credit reports and scores as part of the borrower-screening process, and cardholder agreements usually allow credit card issuers to monitor your credit score as long as your account is active. Landlords and prospective employers must formally notify you in writing and get your permission before conducting a credit check.

Credit scores affect your access to loans and credit cards, but that's not the only reason it's advisable to establish as high a credit score as you can. Even if you don't plan to finance a house or car for many years, a low credit score could affect your ability to get an apartment (or mean higher security deposits on a rental), and a higher credit score could even mean you'll pay less for car insurance.

How to Get Your Credit Report and Score

The importance of credit reports and credit scores for your access to credit and other important services makes it a good idea to check credit reports and credit scores regularly. Doing so tells you where you stand in the eyes of prospective lenders, and also lets you spot and correct any inaccuracies that may crop up in your credit reports. Mistaken credit report entries, while rare, can lower your credit score and even interfere with your ability to get loans or credit cards.

By law, all Americans are entitled to a free credit report from each national credit bureau once every 12 months, via the AnnualCreditReport.com website. And because of increased incidents of credit fraud during the COVID-19 pandemic, all three bureaus are offering free reports weekly, through April 2022.

Confusion over the relationship of credit reports to credit scores has given rise to the mistaken idea that credit reports include credit scores. Credit scores do not appear in credit reports, but Experian offers both free credit reports and free FICO^® Scores so you can keep track of both easily.

You can think of a credit report as the transcript of your history borrowing money and repaying debts, and your credit score as a grade-point average that sums up that history. The two are closely interrelated, and both reflect your actions. If you manage debt prudently and cultivate good credit habits, your credit reports will reflect your wise decisions, and your credit scores will tend to increase over time.