A credit score is a numerical rating used by lenders in the loan approval decision process.
Lenders always want to know the credit history of people who ask them for credit cards and loans. To find out, they turn to credit bureaus.
Credit bureaus keep track of almost everybody’s credit history information — things like how many credit cards you have and how much you owe; whether you pay your bills on time; where you work and how long you’ve worked there.
In addition to your credit history, almost all lenders look at your credit score. This is a number that indicates how reliable you are at paying back your debts. A computer program analyzes your entire credit history and generates a single number or score, usually ranging from 300 to 850. This score helps lenders decide if you’re a good credit risk or not.
Different formulas are used to calculate credit scores, but the higher the score, the lower the risk.
And remember: the higher your credit score, the better the interest rate lenders are likely to offer you — which could mean more money in your pocket!
Note: The three largest credit bureaus in the United States are Equifax, Experian, and TransUnion.
To learn more ways that your credit score can impact you, click the Next button.