People easily get confused with their free credit report and score. Confusing both terms can be very dangerous on your financial status. It is, therefore, important that you know the difference. Not only do both have different definitions, but they are also used for different purposes. Understanding what is first and second is very important so that you will know how to use and get your credit report and credit score to monitor your financial history and standing.
While determining the difference between a free credit report and score, you need to remember that a credit report provides details about your credit history. Your credit history is collected from various sources which include lending institutions, utility companies and even the information from your mortgage. The information is compiled by three major credit reporting agencies to create an actual picture of your financial history and standing. The information included in your credit report will contain your name, social security number, types of credit used, loan information, bills payment, tax liens and other records related to bankruptcy—if any.
A credit score, on the other hand, is a numerical value based on the information from your credit report. Credit reporting agencies use complicated calculations to generate a credit score. There are a lot of formulas to calculate it, but the FICO is widely used by creditors. The FICO score can range between 300 and 850. It is important to take note that a score lower than 400 puts your credit score at poor while a score of more than 700 gives you a good credit score.
What Are They Used For?
Getting your free credit report and score is very crucial if you want to check your financial standing. However, it is important that you know what they are used for in the first place. Determining your financial footing allows you to apply for a loan. Lenders usually take a look at your credit report and score as they have a pre-set standard of determining if you are legible for getting better terms for your loan.
Obtaining a free credit report and score is also useful in employment. Many employers can request for your credit report and score to check if you are responsible with your own finances. This also means that you are responsible in holding a job.
Now that you already know the difference between credit reports and credit score, it is important to take the necessary steps to improve both. So request your free credit report and score today to monitor your financial history.