How credit scoring works

Knowing the basics about credit scores and reporting will help you develop smart credit habits and make effective decisions for your financial future. Over time, these good credit habits and decisions should have a positive impact on your credit score. Healthy credit will help you participate more fully in the modern economy and enable you to take advantage of the credit opportunities you desire.

Credit scoresCredit scores are calculated using information in your credit report. That information is added to your report when companies, such as lenders, banks and utility companies, report your account information to the credit reporting agencies. Scoring models then use categories of information in your reports to calculate a three digit score. Popular scoring models provide credit scores ranging from 300 to 850.

What your credit scores mean

Your credit score provides a snapshot of your credit health to lenders, which can help them make a lending decision. Companies may have different criteria for extending credit, so a score that may get you approved with one lender may not be the same for another. In general, the higher your score, the more likely you’ll be approved and get better terms on credit products, which can save you money over time. In some instances, like mortgages, your credit score may not be the only thing lenders look at before offering you credit.


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