What Is A Credit Score

Your credit report contains information about any credit you have, including credit cards, car loans, mortgages and student loans. The credit bureau or any prospective creditor uses this information to generate a credit score.

A credit score statistically compares information about you to the credit performance of a base sample of people with similar profiles. The higher your credit score, the more likely you are to be a good credit risk. The better risk you are, the better your chances of obtaining credit at a lower interest rate.

When a potential creditor looks at your credit report, they are looking at a report from at least one of the major credit bureaus: TransUnion, Equifax and Experian. These companies collect account and payment information on you from your creditors. Creditors may report information to just one, or all three credit bureaus. It’s important to know what is on your credit report from all three bureaus. Because only certain lenders report to particular credit bureaus, you may even have different credit scores at each of the three.

A host of factors are used by potential lenders to determine your credit score. Some factors carry more weight than others. The most amount of weight goes to factors concerning:

Payment history: including whether you've paid your bills on time. It also lists the amount of time any delinquencies have lasted.

Outstanding debt: This includes the amounts you owe on your accounts, the different types of accounts you have and how close your balances are to the account limits.

New credit: An important factor that includes how many applications for credit you've made and how recently you've made them.

Credit history: The lender looks at how long you've had credit, how long accounts have been open, and how long it has been since you've used each account.

A sure-fire way to improve your credit score is to pay all of your bills on time, every time!

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