Credit Score

Credit Reports vs. Credit Scores: What Are You Looking For?

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We do a lot of writing about the importance of credit scores and credit reports when it comes to lending and debt. After all, generally the better your credit report and credit scores, the more affordable it will be to borrow money. Recent statistics provided to us by Yahoo! Analytics would indicate that many of you think this stuff is important, too.

Searches for “credit scores” on Yahoo! are up by 190% this month, searches  for “free credit reports” are up 1,125%, and those for “average credit score” are up 221%. But here’s the most interesting slice of data from Yahoo!: there were more searches for the term “credit score” (58%) than “credit report” (42%) over the past year.

The fact that consumers are more interested in their scores than their reports isn’t terribly surprising, but it does concern me on some levels. I can understand why people obsess about scores for the same reason that they obsess about grades in school. People want to know the bottom line when it comes to how they are being evaluated.

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But it’s important to remember that most of the really important information about your creditworthiness is contained in your report, not your score. It’s also important to remember that individuals don’t have a single credit score to which they can refer. There are multiple credit scoring models, used by the different credit bureaus and financial institutions, so when you either get a free credit score or pay for one, it’s very unlikely that that score will be identical to the one used by a financial institution to determine your creditworthiness. It should, though, give you a good approximation of your score range. (To learn more about the credit scores used by financial institutions and those which consumers generally see, read this very informative article by Credit.com’s credit scoring expert Tom Quinn.)

[Related Article: CFPB Study---Consumers, Lenders Not Looking at Same Credit Scores]

Credit reports provide the data that are used to create credit scores. If the information in any of your credit reports is wrong, a credit score calculated from that data may not accurately reflect your creditworthiness. (Some information on credit reports, such as employment data, aren’t used to calculate credit scores, however.) That’s why it’s crucial to review your credit reports at least once a year.

On the other hand, credit reports don’t show you how lenders may view your credit. That’s where credit scores come in. They can help you understand how your credit compares to other consumers. And most credit scores provide information about the areas of your credit report that need improvement.

Credit reporting agencies aren’t required to give consumers credit scores for free, though. Lenders are only required to disclose the credit score used if you are turned down for credit, insurance, or another benefit—or charged more for that benefit due to a credit score.

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You can order one free credit report each year from each of the three national credit reporting agencies at AnnualCreditReport.com and services like Credit.com’s free Credit Report Card provide a free overview and analysis of your credit. Since the three agencies don’t share information with one another, it’s a good idea to check all three of them. If you are trying to build or rebuild your credit, or if you are worried about possible identity theft, it may also be helpful to subscribe to a credit monitoring service.

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