Difference between a credit report and score

If you are looking to obtain your credit report score, then take a moment to read the information below to better understand the concepts behind your credit profile.

The two terms credit report and credit score and often used interchangeably in error. However they both refer to totally separate aspects of your personal credit profile. The credit report is actually used to generate the credit score. More specifically, your credit report contains your complete payment history as reported by your creditors. The report will also contain the balances of all your debts outstanding as well as any court orders or collection actions that have been initiated against you. Any bankruptcy’s or credit proposals you may have been involved in are also mentioned. The credit report is maintained by a credit bureau such as Equifax or TransUnion. The report will on average maintain a record of the past six to seven years of your payment data.

The information from this report is used to calculate your credit score. The formula or algorithm used to calculate the score depends upon which bureau is generating it. However the FICO score is the most used number by most bureaus and lenders in making lending decisions. The FICO score formula was originally developed by the Fair Isaac Corporation. The three digit number ranges from 350-850 and uses several factors in determining your credit worthiness. The higher the score the better your credit worthiness is. Higher scores are considered lower risk by lenders and therefore they will lend funds at more favorable interest rates. This score is not the only criteria used for the decision but it is a major factor. Look at it as a filter that is used by lenders to determine which applications will be considered and which ones will be denied. If the score is high enough then the application is looked at more closely for income verification and collateral criteria qualifications. The credit score is often referred to as a beacon score or simply beacon in Canada.

Derogatory information on your credit report affects score

If you feel your credit score is low or you have been denied a loan recently, then you will need to properly inspect your credit report. Any negative information that has recently appeared in your report will lower the score. Negative information can be one of various derogatory data such as late payments, very high revolving credit balances, references to collection action, bankruptcy filing and possible information from fraudulent activities. This latter fraudulent data appears on your credit report as a result of identity theft and you should take such a scenario very seriously. Immediately contact your credit bureau if any information on your credit report appears to be a result of activities that you are not aware off. Also check to make sure all the other data apart from any fraudulent references is current. For example, make sure that the outstanding balances reported by your creditors are the most current balances.

Credit report and score do not transcend international borders

Many people are unaware of the fact that your credit report and score do not transcend international borders. So if you have a specific credit profile in the United States, that information will not appear on a Canadian credit profile if you start any credit activity in Canada. While this information is irrelevant to most individuals, it becomes a factor for business people who are carrying on business of an international scope and may need to secure funds in more than one country for their operations.

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