What is my Credit Score?
Date: February 9, 2023
A credit score is a 3-digit number generated by credit reporting agencies using the information in an applicant’s credit report as a measure of creditworthiness.
By looking at an applicant’s credit report – a record of credit accounts, balances, and payment activity – creditors can see how well an applicant has managed debt repayments and how much they currently owe to other creditors. If a lender is confident that a borrower can and will honor a debt obligation promptly, the borrower is deemed creditworthy.
Lenders use credit scores and credit reports, combined with other factors such as a borrower’s income, length of employment, and debt-to-income ratio, to help decide whether to extend credit, how much credit to offer, and what interest rate to charge. A high credit score can make it easier to get a loan, rent an apartment, or qualify for lower insurance rates.
Credit scores are impacted by:
- Payment History
- Amounts Owed
- Length of Credit History
- New Credit Applications
- Types of Credit Accounts (mortgages, car loans, credit cards)
The two most common credit-scoring models used are FICO® and VantageScore®. In 1989, the Fair Isaac Corporation introduced the FICO® scoring model. In 2006, the three major consumer credit bureaus, Equifax, Experian, and TransUnion, created the VantageScore model. Both models predict a consumer’s ability to repay a debt, although they do not treat all credit data equally and may produce different scores. Today, 90% of lenders use FICO® scores.
FICO® scores range from 300 to 850 points. Typically, a score over 650 is considered “fair,” over 700 is “good”, and over 750 is “excellent.”
How can I find out what my credit score is? Some creditors offer access to credit scores as a free service for their customers. Check with your financial institution and credit card issuers to see what they offer. Companies such as CreditKarma offer free access to your VantageScore® but not your FICO® score. Credit bureaus (Equifax, Experian, and TransUnion) also provide access to credit scores, often for a fee.
Unlike credit reports, credit scores cannot be contested or corrected. However, ensuring your credit report is accurate helps ensure your credit score is correct.