Are your credit report and your credit score “one and the same?” Many people use the terms interchangeably, but they are two distinct metrics financial institutions consider to evaluate your creditworthiness. Following are some common questions about credit reports and scores.
A. The relationship between a credit report and a credit score is akin to how a report card and a GPA report a student’s performance. The credit report, like a report card, shows your performance in several different areas over time. Only instead of reporting a “grade” for math, English and theology, a credit report provides a detailed history of your current and past credit accounts and debt, third-party collections, certain public records and requests by lenders for the credit reports. The credit report includes the dates accounts were opened, loan amounts, current balances and payment history. In contrast, a credit score functions as a GPA, and is an algorithm that measures your credit risk based on the information in your credit report at one point in time.
Q. How does my credit score affect my creditworthiness?
A. The most widely used credit score, FICO, looks at five factors found in your credit report: payment history, amounts owed, length of credit history, new credit and mix of credit.
Q. Who determines my credit report?
A. The three national credit reporting bureaus are Experian, Equifax and TransUnion. Each bureau maintains one credit report on each person. The information in each report can differ because creditors don’t have to report account information to all three.
Q. Who looks at my credit report?
A. Mortgage lenders and auto lenders will look at credit reports to identify any red flags. Insurers will also use your credit report information to create their own credit-based insurance scores.
Q. Who looks at my credit score?
A. Mortgage lenders and auto lenders look at credit scores to determine approval, interest rates and loan terms. Credit card issuers generally use one credit score for the application process.
Q. Do employers look at my credit score?
A. No; the credit bureaus don’t supply credit scores to employers. However, the credit bureaus provide modified versions of credit reports to employers. Nearly half of employers pull credit reports as part of their background checks on potential employees, largely to help prevent theft and embezzlement.
Q. How can I see my credit score?
A. Under federal law, you are entitled to a free copy of your credit report once every 12 months from each credit bureau. Free reports are available at www.AnnualCreditReport.com
Expert Source: Joe Clark, CFP, Financial Enhancement Group and host of “Consider This”