American households and the national economies are dependent on credit. Americans highly depend on credit to enjoy the best of life and repay the money through their working years. Imagine having that car, house, and any other property today and paying for it over a couple of years.
Why would anybody then wait to own a home in their eighties when they could enjoy it today? But to get credit from lenders, your ability to pay must portray confidence to them. That’s what led to the invention of credit reports and scores.
Rather than just look at you and make a decision or undergo vigorous, expensive, and time-consuming investigations on a borrower’s ability to pay, lenders have opted for the credit score system. The system allows industry players to quickly and efficiently decide whether or not they will offer you credit. It is cheaper and takes less time to provide players with the necessary information.
What is the Difference Between Credit Score and Credit Report?
Before looking at the difference between the two terms, it’s important to note that they are closely related, leading to the other. For that reason, people tend to look at the two as if they are one and the same thing. However, there are ways in which credit scores and credit reports differ. So, what are credit scores and reports?
- What are Credit Reports?
A credit report is a historical record of a borrower’s ability to settle debts. The report gets the borrower’s details from multiple sources, including credit card companies, banks, microfinance, governments, collection agencies, etc. Besides, credit reports also show where one lives and work. Also, it indicates whether you have filed for bankruptcy or have been arrested or sued. Credit reports then use an algorithm to allocate percentages to these considerations and generate a credit score.
- What is Credit Score?
A credit score is based on an individual’s past performance to repay a loan or mortgage extended to them by the lender. It is an expression built up on a close check of an individual’s credit files to show the creditworthiness of that person. Credit scores range from 300 to 850; the higher the score, the better. Credit scores are extracted from credit reports.
- Difference Between Credit a Score and a Credit Report
The main difference between credit reports and credit scores is that a credit report provides summarized data on your borrowing history for use by creditors and lenders. On the other hand, a credit score comprises three-digit numbers that instantly represent the overall credit risk. The credit score figure ranges between 300 and 800 and is acceptable in the industry within a particular jurisdiction and, in this case, the United States.
Which is the Best Site for Credit Report and Score?
If you’re looking for a free credit report and score bureau to help you check and monitor your creditworthiness performance, there are options for you! There are three major recognized credit bureaus in the United States: Equifax, TransUnion, and Experian. According to the law, you are entitled to three free credit reports yearly. That is, you can request a free credit report from each of the three credit bureaus.
However, it is important to note that this is for individuals, not businesses, families, or groups. If you have exceeded your three-time requests from the bureaus or want a credit report for a business, family, or group of people, you will have to pay for it. The charges vary depending on the credit bureau you have decided to use.
For an easier application for a credit report, you can visit www.annualcreditreport.com, which is a website operated jointly by the three government-recommended credit bureaus and is the only officially free site for such undertakings in the United States.