What’s the difference between a credit score and credit report?

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This post is part one in the “What’s my credit score?” blog series.

Money makes the world go round, but it’s credit that makes money flow a little easier.

When creditors loan you money or issue you a credit card, they aim to make a profit by charging you interest until your loan or balance is paid. So they need a process to identify which customers are more likely to pay back their loans than default.

That’s where credit reports and credit scores come in. Find out your score now with our Free Credit Monitoring service.

What does a credit report show?

A credit report details your entire credit history using information gathered from a variety of sources, including lenders, landlords, and utilities. It outlines all of your past and present accounts and payments, including credit card accounts, mortgages, student loans – and even inquiries into your credit history by other lenders.

It also details how much you owe, how long each account has been open, and how often any of your payments are made on time. In addition, credit reports include public records like collection actions or court judgments, as well as property tax liens or bankruptcy filings.

This information is compiled by one of three major credit-reporting agencies: TransUnion, Equifax, and Experian. These companies are in the business of compiling an accurate financial history. But mistakes can happen, so checking your individual credit report once a year – and disputing any errors – makes good sense.

Fortunately, under the Fair Credit Reporting Act, consumers are entitled to one free credit report a year by going to AnnualCreditReport.com.

However, one thing your credit report won’t include is your three-digit credit score.

How is a credit score different?

Your credit score is a three-digit number that tries to answer the question: Given everything listed in your credit report, what kind of a risk are you to creditors and lenders? Essentially, the credit-reporting agencies use their own proprietary algorithms to compare your credit report with a pool of similar credit reports to determine how likely you are to pay back a loan or credit card.

Like most scores, the higher yours is, the better off you are. Credit scores typically range from 300 to 850, especially those based on the standard FICO score. A higher score will often mean you can get better terms (lower interest rates) on a loan or credit card. Some insurance companies also use credit report information to help predict your likelihood of filing an insurance claim and the amount of the claim. In many states, a high (good) credit score can also lower your car insurance premiums.

More than half of your credit score is composed of two factors: payment history (how often you miss payments and how late they are) and your relative debt (how much you owe relative to your credit limit). Other factors include the length of your credit history, how much of your credit is newly opened, and how diverse your credit is (credit cards vs. loans or other accounts).

The same credit-reporting agencies mentioned above will disclose your credit report – just not for free (they’ll likely give you the option to buy your credit score when you ask for the free credit report).

One way to get your credit score for free is MoneyLion’s Free Credit Monitoring service, which lets you quickly learn your credit score from our partner TransUnion after answering a few brief questions. Sign up on your mobile device and you’ll have your credit profile right at your fingertips along with our Credit Score Simulator tool that lets you see how different actions can impact your credit score (like getting a new credit card, missing a payment, etc.). We’ll also alert you of changes in your credit report that may impact your score.

Once you know your credit score, you can work on ways to improve it. Learn how in our post "Five easy ways to help raise your credit score" in our “What’s my credit score?” blog series.

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