The Difference Between a Credit Report and a Credit Score

What is the difference between a credit report and a credit score? It’s a common question. Simply put, your “report” lists all the information related to your debts and credit activity over the past seven to ten years.

Your credit “score,” on the other hand, is a rating or a grade based upon the information found on your credit report at the time your score is generated. The credit score attempts to predict your future credit behavior. After all, the best predictor of future behavior is past behavior. This is why credit scores are based upon patterns of behaviors over a period as long as a decade, and not on a snapshot of your current financial situation.

Look at it this way, if you were a lender and saw two potential borrowers, A and B, with similar numbers of accounts and amounts of debt, you would be tempted to believe they present equal risk to you as a lender. However, if you looked at their past 7 years of debt behavior and noticed that borrower A has reduced her debt by more than half during that time while borrower B has more than doubled his debt during the same period, you will likely feel more comfortable with the direction borrower A is headed than borrower B.

Your credit report is your history of borrowing that can reveal your debt’s direction. Your score may look like a snapshot of where you are, but it also uses your history to predict future direction.

What kind of information is listed on your credit report that would show such patterns and directions?

Find the answers in our next lesson.

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