Safeguarding a customer in terms of money transactions, money lending process, and improving the cash flow is usually a difficult task in a developing or a developed nation. This crucial role of helping the customers with a proper set of guidelines and the rules becomes a difficult task for an institution or an organization.
Having taken the learning’s and the positive outcomes from the above-mentioned scenario, there comes a concept of credit and there are two parties involves in the process of proceeding the credit and the assigning authority will be usually a bank.
If a customer approaches these institutions or organizations or banks that were assigned to generate the credit and delegate the same to the next authority, there will be certain process checks and detailed para-metrical report cards that will be available.
This report card gives the total information about the customer’s history of credit and the time for which the credit was assigned and the clearance date. If the report is positive about the credit history of the customer, he would be getting the credit else it will be rejected.
There will be scores even on the report card that determines the credibility and transaction status on which the lending authority can rely to generate the credit.
Credit Report vs FICO
The main difference between a Credit report and FICO score is the credit pattern analysis and assigning a score depending on the pattern. A credit report has a detailed analysis of a customer’s credit pattern starting with the date of avail of the credit and the final repayment of the same while FICO offers a score based on the creditworthiness of any individual.
Comparison Table Between Credit Report and FICO (in Tabular Form)
| Parameter of Comparison | Credit Report | FICO Score |
|---|---|---|
| Reporting authorities | It is always the governing council that is a bank | It is governed by the FICO company |
| Analysis pattern | It is a detailed document having the in and out’s of the credit history | It is a three-digit score |
| Method | It is a process-oriented report on the total transaction details of a customer from the past 36 months | It is a method of measuring an individual’s Credit worth |
| Scores | It doesn’t have a scoring pattern | It has scores ranging from 300 -850. |
| Reporting | It has complete details of the location, bankruptcy, etc | It has only a score assigned based on the analysis |
What is Credit Report?
A credit report is documented proof of a person’s credit history that is duly prepared by the credit bureau. The credit report is prepared by the credit bureau. They take into account various pieces of information to ascertain the creditworthiness.
This ‘creditworthiness’ is documented as a credit report. This report is used by the financial institutions or any lenders to check with the applicant’s whether to offer a loan or not.
The reporting companies systematically make the report. They collect all the necessary information about the financial transactions of the person. It includes the bill-paying habits too. With the help of all the information, the credit report is prepared.
There are 4 major divisions in a credit report.
- Personal Information: Name of the customer, addresses, employers.
- Accounts: This includes any loan accounts until the credit card accounts.
- Inquiries: This is an important division, it clearly states which companies have looked into particular candidates data for offering loans.
- Public Records: Any bankruptcy information shall be present in this division.
If the credit report of a customer has an extended history on the credit repayments, this will affect the scores for which a negative score might be assigned.
If the reports are positive then the customer gets credit cards and loans as soon as they request a favorable note.
What is FICO?
A FICO Score may be a three-digit variety that supported the data in your credit reports. It helps lenders confirm however possible you’re to repay a loan. This ascertains the borrowing status and also the repayment status.
FICO scores give a quick and reliable method to decide to offer a loan or not. In most cases, they’re going to check out your FICO Scores.
FICO score is the snapshot of what a credit report is. It is a concrete measure of a person’s creditworthiness in the loan market. Not solely will a FICO Score facilitate lenders build smarter, faster choices concerning World Health Organization they loan cash to, it additionally helps individuals such as you get honest and quick access to credit once you want it.
FICO came into existence 30 years before that helps the lenders and the borrowers. There were many other scores which were available before FICO came into existence.
FICO score helps individuals to avail loan on a faster basis. This may be for education, personal emergency or much more. The fact is, a decent FICO Score will save a lot of money and energy. As such, it is a good way to ascertain a person’s credit rating, a faster way too!
Main Differences Between Credit Report and FICO
- The main difference between Credit Report and FICO Scores is the scoring pattern of an individual based on the previous credit history of the customer however Credit report focus only on the report generation whereas FICO scores focus on the scoring pattern for each category.
- FICO scores are rated based on the category and a unique percentage is given to every category but Credit report gives an overview.
- FICO scores have the authorization to extend credit or decline it but the Credit report doesn’t specify anything about this.
- Credit bureaus determine the factors of credit report and FICO company determines the factors of FICO scores
- The option of getting a free credit report is available with agencies that issue the report but this will not be applicable for FICO scores as the scores are generated only based on the transactions made.
Conclusion
A credit report has all the details of the customer’s past transaction history from the time of availing credit till the time of repayment of the credit and will be categorized for future reference.
FICO score is a three-digit number that helps determine how much a customer pays for the credit which can affect virtually all the expenses.
Many US lenders use one type of credit score called the FICO score, that has the total transaction history into a single three-digit number that predicts how likely a customer pays the credit or not.
Having a high credit score and a better credit report that has a good FICO score, customer can avail a strong mix of all the facilities at a better option on the convenience.
References
- https://mpra.ub.uni-muenchen.de/47783/1/MPRA_paper_47783.pdf
- https://www.federalreserve.gov/pubs/Bulletin/2004/summer04_credit.pdf