Credit score vs credit report: What’s the difference and why they matter
It is well known that your credit score directly impacts your ability to get a loan and a lower interest rate on it. But what factors impact your credit score? The credit report has answers to that. It is important to know the difference between the two and why both matter.
A credit score is a three-digit number that predicts how likely someone is to repay their debts on time. It’s calculated using a mathematical formula that analyzes a person’s credit history, which includes information such as repayment history, total credit balance, number of loans and credit cards, credit utilization, and more.
Financial institutions use credit scores to make decisions about lending money, offering credit, and other financial services. For example, if you go to a bank to seek a personal or home loan, the bank will first check your credit report. They are more likely to approve your loan if you have a good credit history.
A credit report is a detailed record prepared by credit bureaus based on several factors, primarily including repayment history, credit utilization ratio, credit account age, total number of credit accounts, and hard inquiries. Each bureau uses this information to calculate a score out of 900, which becomes your credit score.
In essence, while a credit score provides an overview of your financial health, a credit report serves as a detailed map, or «financial kundali», of your credit history.
Also Read: Your ultimate guide to maintaining a good credit score
Currently, four credit bureaus operate in India: TransUnion Cibil, Experian, Equifax, and CRIF High Mark. All four are regulated by the RBI. Credit scores from different bureaus can vary for the same individual. For example, my Cibil score is 803 as of today,
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