You might have seen the terms credit report and credit score and now be left wondering what the difference between them is. Both of these terms are often used interchangeably, but they are actually two different things, which isn’t something that everyone is aware of.
In this article, we are going to explain the difference between your credit score and your credit report to help you understand what they both mean.
We are also going to take a look at how they work together to allow you to see what your financial health is looking like.
What Is A Credit Report?
A credit report is a record of your borrowing history, and it contains information about how you have borrowed money and paid it back.
The majority of the information in your credit report will come from lenders, and this information is compiled by credit reference agencies If you didn’t already know, credit reference agencies are those that create your credit report.
The three main parts of your credit report are your personal information, your credit account history, and your payment history. We will explain each of these in more detail below.
The personal information section of your credit report will contain your name, date of birth, address history, and whether you are registered to vote at your current address. Your address is particularly important, as credit reference agencies will use it to match up all of your credit history.
This is why it is really important to ensure that all of your financial accounts are registered to a single address. If you move house, you will need to ensure that you tell your lenders sooner rather than later, so they can go ahead and update your information. This is the best way to ensure that your credit report remains accurate and complete.
Credit Account History
This section of your credit report will be focused on your credit accounts, like any credit cards that you own, and your current accounts, like your personal bank account.
You will also be able to view the total amount of debt that you are currently in, which is your balance.
Your account history will display any current accounts, credit cards, short term and long term loans, and more. Your current accounts will display a balance of £0, unless you have taken out an overdraft.
This section can also include other accounts, including utilities providers, internet service providers (ISPs), and mobile phone networks, as these are credit accounts.
Whenever you are receiving a service now and paying for it later, you are receiving credit, and this will show up on your credit report. However, some providers will not show up on your credit report if they do not send reports to credit reference agencies.
Your credit report will also show whether you have paid your debts on time every month or whether you have made any late payments.
It will also show if you have missed any payments entirely. You should always try to pay your debts on time if you can, as missing payments or late payments will reflect badly on you.
What Is A Credit Score?
Your credit score will be a number that reflects how likely you are to be accepted for credit, and how favorable your credit terms are likely to be.
This is all based on the information within your credit report. This number will essentially reflect how good or bad your credit history is.
The higher that your score is, the better. Having a high score would suggest to lenders that you are more reliable, making them more likely to give you credit.
Different credit reference agencies will give you different scores, depending on the system that they have in place. Your credit score may also be color-coded to reflect how good or bad it is.
What Is The Difference Between A Credit Score And Credit Report?
Your credit report is the detailed record of all of your financial behavior. A credit score is a number that is calculated by credit reference agencies and lenders that sums up the information within the report.
Your credit report will show how you have handled credit in the past, and looking at your report allows credit providers to answer important questions about your financial habits.
They will consider how much debt that you currently have, whether you usually manage to pay your debts on time, and whether you tend to take on more credit than you can afford to pay.
These things will help credit providers to decide whether or not they should give you credit, on what terms they should offer you credit, and what type of interest or repayment schedule they will offer you.
If you were just to look at your credit report alone, it would be interpreted differently by different people, making it more difficult to understand how you are doing.
Your credit score will basically sum up all of this information into one number, making it easier for you to see how you are doing.
However, you should also be aware of the fact that your credit report is not the only data that a credit provider will look at before they make a decision. The information on your application, their history with you as a customer, and other factors can also be important.
Things To Remember
- Your credit report is a record of your borrowing history that contains your personal details and a list of your past and present debts. It also shows if you have made payments on time or have missed any payments.
- Your credit score is a 3 digit number that is based on your credit report. The higher that this number is, the more attractive you are to lenders. A low number can reflect badly on your relationship with credit.
- Your credit score does not automatically guarantee that you will be accepted or rejected for credit as individual credit lenders can score you based on their own criteria.