Credit Scores vs. Credit Reports

Whenever you watch TV you most likely are going to see at least one commercial for a credit report and/or score offer. There is a big misconception that these terms are synonymous. Credit scores and credit reports have varying formats and uses. It is important that you understand the difference between the two. Outlined on this page are the principal disparities of each.

What Are Credit Scores?
A credit score is a numerical value that is determined based on the info that makes up your credit report. There are three credit reporting bureaus and they each utilize their own complex proprietary algorithms. Your actual score is called a FICO Score and is calculated by the Fair Isaac Corporation. Your FICO score is the most commonly used score utilized by lenders when determining your credit worth. The weight of each of the components that make up each persons credit scores are going to vary. However, in general, FICO utilizes the breakdown below:

10% types of credit used� - The makeup of the different types of credit you use. For example, credit cards, retail, personal loans, mortgage, etc.
10% new credit� - How many accounts you have recently opened.
15% length of credit history� - How long your accounts have been open.
30% amounts owed� - How much you currently owe.
35% payment history� - Do you make your payments on time?

What Are Credit Reports?
A credit report is a collection of data regarding the current status of your credit accounts as well as your entire credit history. The bureaus obtain this info from creditors, landlords, utility companies, etc. and can consist of an abundance of personal information including your name, SSN, types of credit, balances, account history (whether or not you pay on time and in full), if you have any account in collections, and/or if you have experienced foreclosure, bankruptcy, etc..

It is important that consumers obtain a copy of all three credit reports and scores at least once year. The point is to know where you are at with your credit and to also determine if there is any erroneous and/or outdated info listed on any one of your credit reports. An equally good idea is to utilize a credit monitoring system that will notify you every time a new account is opened and/or a credit inquiry occurs. These types of services have a monthly fee between $9.99 - $49.99 associated with them. That is a small price to pay to help avoid becoming a victim of identity theft.

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