Credit score vs. Credit report

Credit score
Credit score vs. Credit Report - Why Do You Need To Understand Both? Today the Hispanic Solutions Group team gives you the details

By Manuel Tovar, August 06 – Hispanic Solutions Group

Credit score vs. Credit Report – Why Do You Need To Understand Both? Today the team of Hispanic Solutions Group gives you the details.

Credit scoresand credit reports play an important role in qualifying for everything from loans and credit cards to apartment rentals and some insurance policies. Credit scores are calculated based on the information in your credit report, but there are key differences in how the two are used. Because of this, truly understanding your finances requires having a comprehensive understanding of both your credit score and your report.

To help you explore each of these important concepts, we summarize how your credit score and his credit report, how creditors use them and how you can access them.

Credit score vs. Credit report: key differences

A credit report provides detailed information about a consumer’s finances, while a credit score is calculated based on the information in that report. So while these tools are different, they are inextricably linked and both are used by lenders and other institutions to assess the creditworthiness of applicants. Therefore, for increase your credit score, review each item in your credit report look for errors and identify areas for improvement.

What is a credit score?

A credit score is a three-digit number used to convey a consumer’s credit worthiness, or the likelihood that they will make bill payments on time. Each consumer has a score FICO Score and VantageScore, although FICO Scores are more commonly used by lenders, and there are multiple versions designed for different types of products. Credit scores generally range from 300 to 850, with scores of 670 or higher classified as “good” and scores of 800 or more considered “exceptional.”

How do credit scores work?

Credit scores are calculated based on information in the consumer’s credit report, such as payment history, credit age, and credit mix. Scores can be calculated by FICO and VantageScore, as well as proprietary algorithms developed by individual banks or institutions.

Generally, the factors used to calculate a credit score are taken from a consumer’s credit report and each represents a certain percentage of their score. The scores FICO are calculated based on the following categories:

  • Payment history.As the most impactful part of a credit score, payment history accounts for 35% of the calculation. This part of the algorithm includes payments on time and any derogatory marks resulting from late payments or default.
  • Amounts owed. Also known as credit utilization, the amounts owed on a consumer’s accounts, compared to their total credit limits, make up 30% of a credit score calculation.
  • Length of credit history.The length of time a borrower has had their credit accounts translates to 15% of their credit score. The longer a consumer has had active accounts per day, the stronger this part of their credit profile will be.
  • New credit.Applying for a new loan or credit card usually leads to a thorough investigation of the consumer’s credit report. These inquiries represent 10% of the credit score calculation.
  • Credit mix.Rounding out the final 10% of a consumer’s credit score, credit mix is ​​the types of accounts a borrower has. Consumers with more diverse debt, such as a combination of revolving and installment accounts, do better in this category.

When you request a new credit card, loan or even insurance, the provider will check your score to assess your overall credit worthiness and the likelihood of making payments on time. This is usually accomplished through a tough credit check, which can cause a temporary drop in your score.

What are credit scores used for?

Lenders, credit card companies, and other financial institutions use the credit scores to measure the risk posed by a potential borrower. In addition, collection agencies use credit scores to assess whether a consumer is likely to repay a defaulted account. Some homeowners also look at an applicant’s score to assess their financial responsibility. Similarly, insurers use credit-based insurance scores to assess the chances of a potential insured making a claim.

How to check your credit score? we indicate three ways

There are several convenient ways to check your credit score and monitor your creditworthiness:

  • Credit rating websites.Visiting a free credit rating website is one of the easiest and most convenient ways to check your credit rating. These services, which are updated weekly to monthly, sometimes offer credit monitoring such as Credit Karma
  • Credit card providers. Many issuers of Credit cards they also offer cardholders free credit scores and score forecasting tools. Simply check with your card provider to see if the service is offered, and then choose to access the available resources.
  • Nonprofit Credit Counselors. Beyond simply checking your score, working with a nonprofit credit counselor can help you better understand your credit profile and help you develop more responsible financial habits.

What is a credit report or report?

A credit report is a comprehensive record of a consumer’s credit history that includes past and outstanding lines of credit, payment histories, third-party collections, lender inquiries, and public records such as bankruptcies and foreclosures. Each consumer has three reports, one compiled by each of the three major credit reporting agencies, such as TransUnion. However, it is noteworthy that credit reports do not include a consumer’s credit score.

How does a credit report work?

As is known, credit bureaus collect all credit activity of a consumer as reported by lenders and other creditors. The offices also maintain a history of consumer personal information and relevant public records. The reports are generally the same in all offices, but some content and formats may vary. Also, the information in each report may vary, because not all creditors report to all three agencies.

Finally, what are credit reports used for?

As with credit scores, credit card issuers and lenders use the credit reports to assess the likelihood that an applicant will pay their debt on time. Insurers also use credit reports to calculate their own insurance scores and collection agencies “to guess” or calculate which bills a borrower will pay first. Employers can use modified office-provided reports to prevent fraud and avoid negligent hiring claims. Lastly, homeowners can use credit reports to screen applicants and determine an appropriate security deposit amount.

How to obtain your credit report?

To access a copy of your credit report, visit AnnualCreditReport.com. Traditionally, consumers can access a free copy of their credit report from each credit officer once every 12 months. However, in the wake of the Covid-19 pandemic, borrowers can access a copy of each report every week until April 20, 2022.

After all of the above, tand we invite you to follow our social networks: LinkendIn, Facebook, Twitter and Instagram to find more information related to finances. Also on our YouTube channel The Credit Channel to learn how to improve your credit. If you need help in repairing your credit, disputing debts that do not belong to you, or other services, call us at (612) 216-1599.