“What’s the difference between a credit report and a credit score?” That’s a very common question we hear from our clients, and it’s easy to see why so many people confuse the two, since sometimes creditors use the terms interchageably.
A credit report is a detailed list of your debts and payment histories with individual creditors. For example, if you have a car loan and a credit card, both would be listed in your credit report. If you regularly make late or incomplete payments to any creditor, that information will appear month-by-month so that potential creditors looking at your report can make a decision about whether to extend credit to you. Different creditors might put different weight on individual items, depending on their individual credit standards.
A credit score is a number that the credit reporting bureau believes represents your credit on the whole. Some creditors rely on credit scores rather than credit reports because they are calculated by the credit reporting bureau based on all the information available, and don’t require the same type of line-by-line scrutiny that credit reports might. For example, if you miss two payments on a loan, your credit report will reflect those payments and the months they were missed. A credit score, on the other hand, would just be reduced by a set amount to reflect the missed payments.
Here’s the catch: credit reporting bureaus (like Equifax, Experian and TransUnion) don’t want you to know how they calculate credit scores, because they are a proprietary financial product available for sale. So you can make a guess about how certain items will affect your credit score, but you won’t know for sure until you see the score change. Reporting bureaus claim they are using their knowledge and data analysis to give creditors the best guess available about your creditworthiness, which may be true. But it’s difficult or impossible to dispute an incorrect score because of the secretive, proprietary formulas used to generate them. Because we know that many credit reports contain errors and misinformation, it’s hard to know where your score should be and how to change it unless you are regularly monitoring your credit reports.
For bankruptcy purposes, we want to look at your credit report rather than your credit score, because we want to be as accurate as possible about who your creditors are and how much you owe to each. If you haven’t had contact with some creditors in a long time, your credit report might be the most accurate record we can find to make sure all of your creditors receive notice of your bankruptcy filing.