Aren’t Credit Reports and Credit Scores the Same Thing? If Not, What Are They and What Are They Used For?
We’re going to tease out the difference between a credit report and a credit score. After the differences are down pat, we’ll go into credit reports. I want you to know who uses your credit reports and what they use them for. Let’s leave credit scores for later.
What’s the Difference Between a Credit Score and a Credit Report? Aren’t They the Same Thing?
A credit score isn’t the same as a credit report and the two terms are often confused. A credit report is a history of your credit behavior. Like any report on behavior: you did this, that, and the other, and each incident is recorded into a report for better or worse. Your credit score is a numeric value based on the incidents recorded in your credit reports from each of the reporting agencies: Experian, Equifax and TransUnion. It may help to quit using the term “credit rating.” Just remember credit report and credit score.
What’s On My Credit Report?
Here’s a list of things that show up on a credit report according to myFICO.com. If you’re looking for your credit score on this list you won’t find it. It doesn’t appear on the credit report you have access to for free . You have to pay for the magic number, (score)
- Personally identifiable information (used for identification purposes only)
- Your name
- Social security number
- Date of birth
- Employment information
- Credit Accounts
- Every account you have with a lender and it’s type, including but not limited to:
- credit cards
- auto loans
- When the account was opened
- Your credit limit or the amount of the loan
- The balance on each account
- Whether or not you made your payments on time
- Credit Inquiries also known as pulls
- A credit inquiry, or pull, is when you or another party requests a credit report. There are two different types of credit inquiries or pulls; hard pulls and soft pulls. A more in depth description of credit inquiries is available at this page.
- Hard Pulls
- A hard pull happens when someone else checks your credit with your permission. An example is when lenders check your credit before approval of a loan.
- Hard pulls can affect your credit score. How much and why is for later. It’s a vague and confusing subject.
- Soft Pulls.
- You pull your own credit report
- One of your current creditors checks your credit.
- You apply for a soft-pull preapproval with a creditor.
- A company checks your credit for a preapproval.
- Soft pulls or inquires do not affect your credit score.
- Public Records and Collections
- Whether or not you’ve been sued
- Your arrest record
Information is voluntarily reported by lending institutions and collection agencies. Credit bureaus buy it from companies that provide information from public records. Not all lenders report to all three credit bureaus and some don’t at all. This means that even if all three credit bureaus recorded their information the same way (which they don’t) they wouldn’t have the same information.
If you use the link for this section to dig down on when stuff comes off your credit record you’ll find the one phrase used ad nauseam when reading about credit reports and scores, “it depends”. It makes one want to scream! It’s no different when talking about when items come off your credit record. Without further ado let’s all get frustrated together because it affects all of us.
How long items remain on our credit reports is regulated by the Fair Credit Reporting Act. The FCRA is a federal law originally passed in 1970. Follow the link if you want to know what it does for you and what it covers. It’s a summary that’s only two and a half pages long and an easy, understandable read.
Nothing in the FCRA forces credit bureaus to remove positive information. The FCRA does force credit bureaus to remove negative information after time periods specific to each piece of information. Here’s how long some stuff stays on a credit report according to Experian.
- Open accounts in good standing – Indefinitely
- Closed Account in good standing – 10 years
- Late or missed payments – seven years
- Collection accounts – seven years
- Chapter seven bankruptcies – ten years
- Chapter thirteen bankruptcies – seven years
- Credit inquiries or pulls – two years
This isn’t an all inclusive list and the time frames mentioned aren’t iron clad. Again, it depends.
Not all lenders get their information from the same credit bureau and some use reports from all three at the same time. This is called a tri-merge credit report and are used by a mortgage lender. That’s the one to get if you’re checking your credit. Forget it. You can’t get one. They’re only sold to lenders.
Lenders from different industries will use different reports or versions of the same report and the three credit bureaus don’t have the same information. That’s why it’s important to get reports from all three credit bureaus instead of just one when you get your annual credit report. None of them have the same information nor do they report it in the same way. You can’t have a tri-merge but you can get separate reports from each of the “big-three” credit bureaus.
Why Would I Want Copies of My Credit Reports?
We’ve all heard how safe our personal information is and we all know those promises aren’t worth the hot air it takes to make them. The United States Department of Justice completed a survey in 2012 that determined 16.6 million people were victims of identity theft . If you don’t want to be part of that crowd, check your credit reports regularly. If you know what’s on your credit report you have a chance to fix errors and stop the theft of your identity.
You can get a free credit report from each of the credit reporting bureaus at https://www.annualcreditreport.com/index.action once a year. Beware impostor sites out there. Don’t fall for tricks like misspelled variations on the URL above. Starting in 2020 and extending through 2026 everyone in the U.S. can get six free credit reports per year from Experian, IN ADDITION to the annual free credit report.
1) Notify the credit reporting bureau your inaccurate credit report came from in writing about the inaccuracy. Write down what the inaccuracy is using this template, in full, and why it should be corrected. Include copies (not the originals) of supporting documents. Keep the originals of every document sent to the credit bureau. Send the documentation by certified mail with a return receipt. Do the same for the company that provided the information using this template.
2) The credit bureau has to investigate errors unless they are deemed frivolous. This should take thirty days. The information you provide will be transferred to the organization that provided the information. That organization must investigate your allegations and report back to the credit bureau.
If you are found to be in the right the credit bureau must report the correction to all three credit bureaus.
3) You must be told what organization provided the information that impacted your credit report. A corrected copy can be sent, upon your asking, to anyone that received your credit report in the last two years for employment.
The three largest credit reporting bureaus in the United States are: TransUnion, Equifax and Experian. They are not part of any government. The credit bureaus are for profit businesses that sell information about people.
1) Lenders want to see what’s on your report so they can decide what interest rate to charge you or if they want to lend to you at all.
2) Property managers and landlords/ladies use your credit report to decide whether or not to rent to you.
3) Cell phone service providers will check your credit report to decide if they want to provide services.
4) Potential employers are primarily looking at credit reports for people that handle money but it may not be limited to bookkeeping or accounting positions. Potential employers may want to see if you’re simply responsible.
5) Insurance providers may decide what to charge partially based on your credit report.
6) Student loans that do NOT originate from the Department of Education are just loans so they fall under the same scrutiny as any other loan.
7) Investment brokerages will be lending you money if you buy stocks with credit.
8) Collection agencies will look at your credit report to see if you got a great new, high-paying job. If you did, you can afford to pay off that loan you let go of. It will also give them an idea where to find you.
9) If you are behind on child support or have a judgment against you, government agencies will be interested in you.
10) Current creditors and lenders might want to know if you’re a good candidate for more credit or a new card.
Credit reports can be a real beast to get your head around. I hope this gives you some insight into the credit report game. If you’ve had some bad credit, get copies of your credit reports and try to do something about it. At the very least you’ll know what’s going on with your credit. You can’t fix it if you don’t know. In the next post, we’ll go down the path of what a credit score is and how it works.