What is a credit score?
A credit score is a 3 digit number generated based on information found in your credit report. Everyone has three scores. The purpose of a credit sore is to predict risk- risk of extending you credit. It allows potential lenders to quickly get an understanding of your credit and how likely you are to become delinquent on your credit obligations.
You have three credit scores, one for each of the major credit bureaus:
- Equifax
- Experian
- TransUnion
How is my credit score calculated?
Your credit score is based on information found in your credit report. There are five major categories used to create your score. Categories aren’t all equal, some carry more scoring weight than others.
- Payment history – have you made any late payments? How late were they? What was the date of your last slow pay?
- Amounts owed – how much debt do you have? What about debt in relation to your credit limit?
- Length of credit history – how long have you had open accounts?
- Types of credit used and number of each
- Revolving versus installment credit accounts
- Credit inquiries / new accounts – Do you frequently have new inquiries appear on your credit?
Up Next: Credit Part 2 Why should I care?