Credit Score and Credit Report: Understanding the Key Differences for Financial Health

Often, people use "credit score" and "credit report" interchangeably. However, they are not the same. Let’s examine the difference and expand our knowledge to understand better how this can support our financial well-being. 

What Is a Credit Score?

A credit score is a three-digit number (usually 300–850) that represents creditworthiness, calculated from information in your credit report. Think of it as your HbA1c level - your level will reflect what you ate over the last 90 days, good or bad, and the same is for your credit score. Your credit score will show how well you have managed your financial obligations over the last several years.

Scores above 700 are good, and scores above 800 are excellent

Credit Score analysis will consist of 5 main components:

1. Payment history- Do you pay your bills on time? Late payments can hurt your score.

2. Amount of current debt- How much debt do you carry? Using too much of your available credit (such as maxing out credit cards) can make lenders nervous. Many financial institutions recommend using no more than 30% of your credit limit.

3. Length of history- The longer you’ve been using credit responsibly, the better.

4. Amount of new credit- Opening lots of new credit accounts in a short time can lower your score.

5. Types of credit used- A diverse range of credit (such as a mortgage, car loan or a credit card) can help improve your score when appropriately managed.

In the US, the most widely used credit score is the FICO score

What Is a Credit Report?

A credit report is a detailed summary of your credit activities within the past 7-10 years. Provided by the three major credit bureaus (Equifax, Experian, TransUnion)

• Credit Report looks at the following components

  • Personal information

  • Account information (open and closed)

  • Payment history

  • Inquiries - both “soft” and “hard”

    • An example of a “soft” inquiry is when you check your credit. It will not impact your credit score. A “hard” inquiry is when a company checks your credit because you are taking out a loan. This will stay on your credit report for approximately 2 years and may impact your credit score. 

  • Public records (bankruptcies, liens, unpaid child support, alimony)

  • Collection Accounts 

    • Medical debt can show up on your credit report if it’s sent to collections. However, recent changes have made it less impactful: some medical collections are now removed after being paid, and there’s a one-year waiting period before unpaid medical debt is reported.

      
      

How To Check and Monitor Your Credit

• You can request one free credit report every year at AnnualCreditReport.com or from each of the three leading credit agencies - Equifax, Experian, and TransUnion. 

  • Accuracy affects your credit score, so taking the time to check your credit report at least annually is key to creating financial health

• Ways to monitor your score for free (e.g., Credit Karma, your bank’s credit tools)

• Red flags to watch for: incorrect accounts, identity theft, missed payments

• If you are married or getting married, your credit report and score will remain separate. Therefore, it remains crucial that you each monitor your credit.

Tips to Improve Your Credit Health

• Pay on time, every time (automate if possible)

  • You don’t have to carry a balance or pay interest to build credit. Paying off your balance in full each month shows responsible use and saves money on interest.

• Keep balances low (aim for <30% of credit limit)

• Don’t open unnecessary accounts

• Set up transaction alerts on your cards or bank accounts to monitor all activity

• Keep old accounts open to help lengthen history

  • Closing old credit cards can hurt your score by shortening your credit history and increasing your credit utilization ratio. If there’s no annual fee, consider keeping older accounts open.

• Dispute inaccuracies in your report

• Use tools like secured credit cards or credit-builder loans if rebuilding credit

Final Thoughts – Empowering Yourself Financially

Financial wellness is also a form of self-care, so take the time at least once a year to assess your credit report. Think of the credit report as the “chart,” and the score as the “overall impression” derived from the information on the chart. You want to know all your test results and what the provider thinks, so don’t wait for a money crisis to occur to check on your financial health. If you need help with this, you can check if your organization offers an employee assistance program or consider taking a financial wellness course at your local community college. So, don’t forget to schedule that one day each year to review your credit report and ensure you are in optimal financial health!