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

When beginning the process of buying a home, most people will rely on a mortgage loan to finance their purchase. In order to qualify for a mortgage at an affordable rate, it’s in the borrower’s best interest to take care of their credit. Having a great credit score and solid history will greatly increase a borrower’s chances of getting a lower interest rate. But before you begin your home financing journey, take a few minutes to understand the components of your credit standing. These include credit score, credit history and credit report.

Credit Score

Your credit score is a numerical, three-digit score that lenders use to determine how likely you are to repay a loan. The number is generated by one of two credit scoring models (FICO and VantageScore). These models base your credit score off of data from your credit report, which we’ll explain in more detail later.

In general, a “good” credit score is 700 or higher. A score of 800 or higher is usually considered “excellent.” Scores between 670-699 are usually considered “fair,” which means people with these scores may still qualify for loans, but will likely have to pay a higher interest rate. Scores below 670 are generally considered “poor.” People with scores in this range may have difficulty getting approved for traditional conventional home loans. However, many lenders have special loan programs designed for lower credit borrowers. These loans may carry higher interest rates, but they are often available to borrowers with scores as low as 580.

Credit History

A person’s credit history is a record of their ability to repay debts. Credit histories typically contain the following information:

• Number of open credit accounts
• Number of closed credit accounts
• Types of credit accounts
• How long each account was or has been opened
• Amounts currently owed on each account
• History of on-time payments
• Number of recent credit inquiries

Credit histories also contain information regarding the consumer’s bankruptcies, liens or collections, if they have any.

For a credit report, the three major credit reporting bureaus (Experian, Equifax and TransUnion) collect all of the information above and compile it into an official document (either paper or electronic). In other words, your credit history is the information that is used to build your credit report.

The length of your credit history can affect your overall creditworthiness. Young people who are just starting out may not have much credit history at all, making it harder for them to get approved for big loans such as a mortgage. However, there are ways to build a credit history without going into too much debt. A few ideas include…

• open a joint credit account or become an authorized user on someone else’s account, such as a parent or other close relative (just make sure they also have good, established credit)
• pay your bills on time, all the time
• apply for your first credit card, make a small purchase and immediately pay it off

Credit Report

A credit report, as we’ve mentioned above, is an official document that details the credit history of a consumer. Most people have more than one credit report, as there are multiple credit bureaus, and since creditors are not required to report to every credit reporting agency, consumers are encouraged to check their credit with all three major bureaus.

Your credit report will contain the financial history of your debts, bills, collections, and the amount of recent inquiries you’ve had on your credit. It will also include your personal information, including the following:

• your name, and any other names you may have gone by in the past
• current and former addresses
• date of birth
• social security number
• telephone numbers

Will checking my credit score lower it?

It’s a common misconception that checking your own credit score will negatively impact it. This isn’t exactly true. Viewing your own credit score and report is considered a “soft inquiry” and should not have any effect on it. Other soft inquiries include instances where companies might check your credit score to see if you qualify for a promotional offer, or if a potential employer is screening you during the hiring process.

Hard inquiries, by contrast, can affect your credit score and potentially lower it. Hard inquiries include applying for a credit card, requesting a credit line increase, or applying for a mortgage.

Talk to a credit counselor or financial advisor for more information

If you’d like to know more about your own credit score, history or report, or you need help building or repairing your credit, contact a credit professional.