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What is Credit Report?
A Credit report is a detailed record of your employment, bank accounts, and past transactions. It also contains your Credit history from various sources like banks, industries, and the government. The various Credit Bureaus in India prepare the Credit report.
This report helps moneylenders know your previous history of credits, their duration & repayments so they can conclude whether you are a trustworthy borrower.
It consists of the following four sections-
- Your personal history
- Detailed information on all your Credit accounts
- Your public records that include details about your transactions, bankruptcies, etc.
- Credit inquiry- details of all the moneylenders who have asked for your Credit report
What is Credit Score?
A Credit score is a number assigned to your Credit database based on your reliability in view of returning loans to moneylenders. In other words, you can describe it as a “rating” of your credibility in repaying borrowed money.
This score is calculated according to your previous history of loans taken & their duration, repayments, total debt, etc. The most important parameters that are used in calculating credit scores are payment history, amounts owed, length of credit history, credit mix, and new credit.
This number helps moneylenders to know your credibility at a glance. Moneylenders also decide the amount of the initial deposit you’ll need to pay when you purchase in installments based on this score. The higher your score is more the chances you have to get a loan, with a small initial deposit.
The Credit source ranges from 350 to 800. It determines your reliability; with a higher score indicating more trust. Generally, 700 and above is considered a good credit score.
A low credit score implies a risk to the moneylenders in lending money to you. Thus, you may need to improve your credit habits to increase your credit score.
Difference Between Credit Report and Credit Score
A credit report is prepared only by the Credit Bureaus. Banks or financial companies can assign you a credit score.
Your credit report is a detailed summary of your credit and payment history, including the types of credit accounts you have had in the past. Your Credit score is a single 3-digit score based on parameters like payment history, current debts, length of credit history, credit mix, and new credit.
Your credit report is created based on your financial details stored in the Credit agencies, whereas your credit score is assigned based on your credit report.
Comparison Between Credit Score and Credit Report
|Parameter of Comparison||Credit Report||Credit Score|
|Definition||It is a detailed report of all your previous credit accounts, loan history, repayment, and other transactions.||It is a three-digit score given to you that denotes your trustworthiness when it comes to returning the money.|
|Created by||Credit bureaus like TransUnion CIBIL, Experian, CRIF Highmark, and Equifax||You can check your credit score on the website of any financial company.|
|Based on||Information stored in the Credit bureau about a person’s financial history||Amounts owed, length of credit history, credit mix and new credit.|
|Use||For moneylenders to get a detailed description of your previous loans & transactions; and decide your credibility.||To determine your credibility in a single glance.|
|Variability||Remains the same, with added details each time you carry out a credit transaction.||Credit scores can increase or decrease depending on your performance in credit transactions.|