Many believe that your credit report and your credit score are basically one and the same thing. Although there is a connection between the two, your credit score is separate from your credit report.
Your credit score is a three-digit number that represents your creditworthiness. Your credit report, on the other hand, contains information about your payment history and other credit-related details.
What is a credit score?
You have many different credit ratings. The most popular score with lenders is a version of the FICO score. There are many versions of FICO scores, including industry-specific FICO scores such as FICO Auto Score 9.
Besides FICO scores, lenders sometimes use VantageScores. The most recent versions are VantageScore 3.0 and VantageScore 4.0. FICO scores and VantageScores range from 300 to 850.
When you apply for credit, the lender asks for your credit score from one or more credit bureaus. Each version of a credit score uses an algorithm to calculate your score based on information in your credit report.
Although both FICO scores and VantageScores have the same numerical range, each score weighs the factors included in calculating your credit score a little differently. Keep reading, and you’ll see what I mean.
Here are the FICO score ranges:
- Exceptional: 800-850.
- Very good: 740-799.
- Good: 670-739.
- Fair: 580-669.
- Poor: 300-579.
There are five factors that make up your FICO score. Here is each factor and the weight assigned to it by the FICO score algorithm:
- Payment history: 35%.
- Amounts due: 30%.
- Length of credit history: 15%.
- New credit: 10%.
- Loan composition: 10%.
Now let’s take a look at the VantageScores so you can see how they differ. Here are the VantageScore ranges:
- Excellent: 781-850.
- Good: 661-780.
- Fair: 601-660.
- Poor: 500-600.
- Very bad: 300-499.
There are also five factors that make up your VantageScore. But instead of percentages, this score takes into account the influence of the factor. Here is each factor and the weight assigned to it by the VantageScore algorithm:
- Total credit usage, balance and available credit: extremely influential.
- Mix of credit and experience: very influential.
- Payment history: moderately influential.
- Age of credit history: less influential.
- New accounts opened: less influential.
If you’re new to credit, it takes about six months of reported payment history to generate a FICO score. With VantageScore, the age of your credit history has less influence, so it only takes about two months to generate a score.
Before we get to credit reports, there’s one more thing I want to point out. Note that an excellent VantageScore starts at 781. But a FICO score of 781 is only considered very good credit. When reviewing a free credit score, find out if it is a FICO score or a VantageScore in order to correctly interpret your credit rating. Other than your credit card free credit scoreyou can also get credit scores from various websites.
What is a credit report?
There are three main credit bureaus: Experian, Equifax and TransUnion. You have a credit report at each bureau. This report contains identifying information, your payment history, a list of your credit card accounts, and details about your mortgages and personal loans, if any.
Examples of negative items include overdue accounts, late payments and late fees. Your report also shows some public records, which may contain negative items, such as bankruptcy or foreclosure. Most negative items stay on your report for seven years, including a Chapter 13 bankruptcy. A Chapter 7 bankruptcy stays on your report for 10 years.
You will not see your credit score on your credit report. But when you apply for credit and your lender requests your credit score from one or more bureaus, the data in your credit report is used to calculate your score.
Now, your score may differ from office to office. Not all lenders report payment history to all three bureaus, which can result in different bureau scores. Note that checking your credit report does not affect your score. So check your reports regularly to make sure the data is accurate and there are no signs of fraud.
Credit report errors and your credit score
You are entitled to a free credit report from each credit bureau every 12 months. Due to COVID, you can get free weekly reports until April 20, 2022. You can request your federally authorized credit report at AnnualCreditReport.com.
It is important to check your credit reports and verify their accuracy. A error in your report could impact your credit score. For example, if someone opened an account in your name and didn’t pay the monthly bill, you might have late fees or an overdue account listed on your report.
A less dramatic example might involve having the wrong date on a collection account. Since items like this stay on your report for seven years, you want to make sure the date is correct so the item falls off your report when it’s supposed to.
As you can see, checking your report not only ensures a more accurate credit score, but also helps you identify fraudulent activity as soon as possible. If you encounter errors or identity theft, the Federal Trade Commission contains detailed steps to follow as well as a sample dispute letter that you can use for reference.