Your Credit Score
A credit score is a number that sums up your credit history and assists lenders in assessing whether you are likely to repay credit card debt and loans, while ranking your credit information with that of other Americans. Credit scores are used on applications for car loans, mortgages, credit cards, and car insurance. For more information about credit scores, go to http://www.federalreserve.gov/creditreports/default.htm or read A Credit Score is a Ranking Not a Score at http://www.clevelandfed.org/research/commentary/2010/2010-16.cfm;
- What is a credit score?
A credit score is not a rating, it is a ranking of one’s creditworthiness compared to the rest of the U.S. population at a given point in time. Your score compares your credit behavior with others. If your score changes over time, it means your rank-order among other U.S. consumers has changed. People with higher scores are always expected to default less on their credit obligations than people with lower scores. However, a score of 750 today may not indicate exactly the same level of creditworthiness as it did a year ago.
- What is a FICO score?
A FICO score is a model of credit scoring that was first developed more than 50 years ago by the Fair Isaac Corporation and named after the company. Since then, more than 100 different models and scores have been developed for and used by lenders, insurance companies, some employers, and utility providers. Credit scores in the United States are now calculated by the Fair Isaac Corporation and a number of other companies, independent firms, and the lenders themselves.
- Why did the three credit bureaus, Experian, Equifax, and TransUnion, join forces?
The three credit bureaus joined forces and created a new company called VantageScore Solutions, LLC. Their goal was to develop measurements that are the same for the three credit bureaus. The scores they produce, VantageScores, are not distributed by the combined company; rather, each credit bureau markets and distributes them to lenders and consumers.
- What are some of the factors that can affect your credit score?
Payment history is the most important factor affecting your credit score; the extent of indebtedness also plays a large role. Other factors include information about how much new credit you are taking on and the type of credit you have.
- How can I find out what my credit score is?
The Federal Government passed legislation allowing all individuals to check their credit report (which contains information used to calculate your credit score), without charge, once a year. For information on how to get your free credit report, go to http://www.federalreserve.gov/creditreports/ or www.annualcreditreport.com.