Credit Report Vs. Credit Score

As you prepare for financial moves like renting an apartment, leasing a vehicle or buying your first home, it’s important to understand your credit standing as well as what this information is used for. Banks and lenders rely on your credit as a representation of your finances – both past and present – and an indication of your ability to commit to loan terms.

But when we talk about credit, there are actually two sides to consider: the credit report and the credit score. In this article, we’ll explore both sides of credit and what you need to know to set yourself up for financial success.

Your Credit Report

A credit report is a running list of your overall financial history. This list includes any current or past lines of credit, payment history, collections history, lender inquiries, bankruptcies and repossessions. Together, these pieces of information determine your credit score and paint a vivid picture of your creditworthiness – or how reliable you are in repaying your debts.

When applying for financing, lenders consider both the credit score and individual report to determine how much risk is involved in lending you money. In general, credit reports filled with late payments, high credit card debt and other financial mishaps will result in a lower chance of loan approval. In the case where someone with a less than ideal credit history is approved for financing, it’s likely the approval will come with less favorable loan terms.

Your Credit Score

While a credit report provides an in-depth look at your financial history, a credit score tells the lender your level of creditworthiness on a scale of 300 – 850, with scores of 300 – 579 being poor, 580 – 669 being fair, 670 – 739 being good and 740 or higher being considered excellent.

Your credit score is determined by the information included in your credit report, specifically your payment history, credit utilization, the length of credit history, any new credit, and the types of credit accounts you already have. Lenders use scoring models generated by the three main credit bureaus (Equifax^®, Experian^TM and TransUnion^®) to translate these pieces of information into the three-digit score. The two scoring models most commonly used are VantageScore^® 3.0 and FICO^® Score.

So why is a credit score important? In addition to securing the best possible rates and terms for loans and credit cards, a good credit score can also make it easier to prove your reliability when applying for things like renting an apartment or purchasing car insurance. Because your credit score has the ability to impact so many parts of your life, it’s important to know where your credit stands and the potential reasons why a credit score might dip and how to avoid them.

How To Find Your Credit Report And Credit Score

Information is power. Knowing where your credit stands can help you better prepare for the financial milestones in your life, so knowing how to find your credit report is crucial. Keep in mind that although constantly checking your credit information may negatively impact your credit score, there are reporting tools available that won’t hurt your credit.

Many financial institutions offer free access to your credit report if you have an existing account with them, so consider asking your bank if this is an option for you. The Rocket Homes^SM VantageScore^® 3.0 credit tool is another free option to gauge where your credit stands without hurting your score – putting the power in your hands to both understand and improve upon your credit before applying for a loan.