Credit reports are more than just scores, although the scores may be the most important aspect in a typical transaction. With that being said, however, some items on a credit report my trump your score. For example, if your middle credit score is 680, but you had a foreclosure or short sale 18 months ago, you may not be able to get a home loan.
In this scenario, your credit score would qualify you for a home loan, but the foreclosure or short sale item trumps that score. This is a unique situation, and typically your score by itself will be a good indicator of what kind of loan you can expect, and how good of a credit risk you are considered.
When asking what is a credit report, many people may not know that the credit reports used by lenders are comprised of three separate credit reports from three separate bureaus. This is called a trimerge credit report, and it is important to know all three scores.
Most lenders use your middle credit or fico score to qualify you. So if you had a 680, a 662 and a 685 as your scores from the three bureaus, your middle score would be the 680.
Here is a basic overview of credit scores and the kind of credit they typically indicate:
720 or higher – this is considered excellent credit, and should qualify you for the most advantageous loans offered. Lenders view you as a very low risk individual to default on a loan, as you have shown a history of making payments on time and in full.
675 – 719 – your credit is still considered good, but you are not the top end of the scale. You likely will qualify for some of the better rates and terms, but credit could cost you a little more than those with higher credit scores. Overall you pay your bills on time and in full, and you are seen as a low risk to default on a new loan.
620-674 – when you get into this range, credit starts to become more difficult to obtain. You are still in the 600′s, and can still likely qualify for home loans and such, but your risk of default is higher, and it may be more difficult to obtain the financing you want, especially in the credit markets today.
Under 620 – This is considered sub prime, and credit is going to be tough to come by. If your score is above 580, you may still be able to qualify for some type of conventional financing, but as standards tighten, the group of individuals with credit scores under 620 will find it increasingly difficult to obtain new loans.
So what is a credit report? In a nutshell it is a way for lenders to decide how risky it is to make you a loan. The less risky your credit report indicates you are, the more likely you are to get a loan! For more information on credit reports, take a look at these other posts:
Understanding your credit report
Sample credit report
