Credit Score FAQs
What is a credit score?
It is the number that a lender will use to determine how likely you would be able to pay back a loan on time. The score is a quick look at your credit and how at risk you may be. If you have a higher score, you are a lower risk to the lender.
How is a credit score calculated?
Each score is calculated and evaluated by many types of information that is in your credit report. All of your transactions change the information in your credit file. Your file is then compared to patterns in other past credit files. It evaluates your payments as well as your credits and loans.
Why do scores matter to lenders?
These scores are a helpful guide to what the risk may be in the future. It is a way for the lender to know how reliable you will be at payment and your timeliness. Because it is a way to determine what your history has been, many loans require good credit scores in order to be qualified.
What are some important factors?
There are mainly 5 factors that credit companies use in calculating your credit score. These factors include: the amount you owe, length of you credit history, any new credit, your payment history, and the types of credit in use. Credit rating companies may look at
things a little differently, but these are the basics.
When does the credit score change?
When you have new information from your creditors, your file will be updated. It is continually being updated as your lenders provide the information to the credit score companies.
Who can have a credit score?
If you have had at least one account open for 6 months or longer, it will be in your credit report. This will help to ensure enough information, hopefully recent information, to calculate an accurate score. A score may not be available if there is a fraud statement on your file or if trade lines have been undecided.
Can I improve my credit score?
Yes. If you are able to continually pay bills on time, keep your balances low on your credit cards, and open new credit accounts only when necessary, you should be able to receive a great credit score, or an improvement from the last time you checked.
Who can look at my credit report?
If someone has an acceptable purpose to look at your report, they can. Included are: potential lenders, insurance companies, landlords, employers, companies you allow, government license applications, state or local child support enforcing agencies, a person using your report to provide a product or service you request, any government agency, or a person authorized by you to obtain your report.
Does a Credit Report Contain Other, Unrelated Personal Information?
No. Your consumer credit report does not contain information about your race, religious preference, medical history, personal lifestyle, personal background, political preference or criminal record.
How Long Does Information Stay on My Credit Report?
Positive credit information remains on your report indefinitely, although information about an account will cycle off your report if no new information is reported about it for seven years. (Thus, a closed account will disappear from your report seven years after it is reported closed by the credit grantor.)
Most negative information remains for up to 7 years. Bankruptcies can remain on your credit report for up to 10 years. Other public record information can remain for up to 7 years.
Most inquiries stay on your credit report for up to two years.
What is a Credit Risk Score?
A credit risk score is a statistical summary of the information contained in a consumer's credit report. The most well known type of credit risk score is the Fair, Isaac or FICO score. Sophisticated mathematical processes calculate the score by assigning numerical values to various pieces of information in the credit report. Credit bureaus provide risk scores to credit grantors who use them to objectively evaluate an applicant's credit-worthiness. The score itself is relative and will be viewed differently by creditors depending on numerous factors, including the creditor's risk level, marketing goals, and business practices. Your risk score will change over time as your credit history develops. See What Is a Credit Score? For more detailed information.
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