What is a credit score?

Your credit score is an objective indication of your credit history and how likely it is that you will make payments on time and according to terms.

Evaluating risk

Credit scores take into account factors such as payment history, amounts owed, length of credit history, new credit and types of credit used.

When tabulating credit scores, factors such as race, color, national origin, religion or marital status are not used. This allows for a nonjudgmental look at your numbers.

Scores range from 300 to 850 and everyone with credit (loans, credit card, etc.) has a score that can fluctuate depending on their financial standing. Your number gives creditors a quick way to evaluate your credit worthiness.

Types of scores

There are two types of credit scores: the FICO score and the VantageScore. The FICO score is used by mortgage lenders and is influenced by factors such as percentage of loan balances to loan amounts, the number of consumer finance accounts, and even the number of credit card accounts you have open. The VantageScore is what you will receive if you purchase a credit report with your score from one of the reporting agencies.

Note that your scores may not be the same in each report due to the fact that not every creditor reports to an agency and not all creditors report to all three of the big credit agencies (Equifax, Experian and TransUnion). Some banks and credit card companies also post FICO scores for free to their customers.