Difference Between Credit Reports & Credit Scores

Nowadays, every time you sit down to watch television, you can rest assured that you are going to see at least one commercial every hour promoting some sort of credit report and score product. A great misunderstanding by many is that these two phrases mean the same thing. They both have different uses and formats. Understanding the disparity between each is critical. Being educated on what credit reports and scores will make you a credit savvy consumer that is financially aware.

What Are Credit Reports?
Your credit report consists of information related to your complete credit history, as well as your current status of your credit accounts. This data is attained by the three major credit bureaus from your creditors, utility companies, landlords, etc. and will be made up of a large amount of personal info including but not limited to your name, addresses, SSN, kinds of credit, account balances and account payment history, and whether or not any of these accounts are in collections. Also listed will be any history of bankruptcy, foreclosure, liens, judgements, etc..
It is recommended, to ensure that you credit report is always accurate and up-to-date, that you obtain a copy of your credit reports from all three major credit bureaus at least once every six months. Doing so will allow you to spot errors quick and take the needed steps to resolve timely.

Nowadays, with the constant breaching of data, ID theft is on the rise. Regularly viewing your reports will allow you to spot ID theft as well, hopefully before it damages your credit. An even better idea would be to enroll in a credit monitoring program. Credit monitoring will alert you of every instance there is an inquiry of your credit. So you'll know within minutes if someone has illegally opened or attempted to open accounts in your name. The cost for credit monitoring usually ranges between $19.99 and $59.99/month depending on who the provider is. The more you pay, typically the more robust the product. The price is worth the protection.

What Are Credit Scores?
Your credit score is the numerical value that is computed from the information and data your credit report consists of. Each of the three credit bureaus use sophisticated credit score algorithms, that are each unique from one another. Your score is computed by the Fair Isaac Corporation and is called your FICO®. This score is what lenders will use when deciding your credit worth. Detailed below is typically how your FICO® is computed. Each individual's credit will be weighed by the variables below differently. But, for the most part, the breakdown below is very accurate and reliable.

-10% - Current Credit Being Used: What types of credit are currently in use? Meaning, retail cards, credit cards, mortgages, personal loans, auto loans, etc.
-10% - New Accounts: How many new credit accounts have you opened?
-15% - Length Of Credit History: The amount of time your accounts have been in active.
- 30% - Total Debt: The amount that you presently owe on your accounts.
- 35% - Payment History: Are you on time with your payments and are you paying the full amount owed every month?