Credit Score Basics

A credit score is a number indicating your level of credit risk to potential lenders, typically a higher number represents lower risk. It is arrived at using statistical models involving different numbers from your credit report. The models were created using payment data from thousands of debt holders, which make the scores extremely effective in predicting credit behavior among consumers.

Your score is usually generated live when a lender asks for your credit report. Your credit score changes as the numbers in your credit report vary. For example, if you make a payment or open a new account, your score may fluctuate.

How are credit scores used?

Credit scores help lenders such as banks, credit card companies, car dealers, and retailers quickly assess a customer’s credit history, allowing them to provide a faster risk decision. Although many factors are used to determine risk, including applicant’s income and amount of loan, a credit score is a major indication of one’s ability to repay debt.

What impacts my credit score?

Generally, your credit score is affected by:
• Total debt
• Recent inquiries
• Number of late payments
• Number of days late on payments
• Number of accounts, type of accounts, and how long the accounts have existed

How do I obtain my credit score?

Lenders usually make credit scores available to consumers during the process of a loan being issued. If you need to access this information outside of a loan process, go to freecreditreport.com for your free copy.

How can I fix my credit score?

Paying your bills on time is the most important thing you can do to earn a high credit score. Even if you owe only a little bit, it is critical that you make your payments on time every time. Try to pay down debt, avoid taking on more obligations than you can manage, and never apply for credit that you do not really need. Time can be your best ally when it comes to improving your credit.