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A credit score is a number that indicates how likely a borrower is to repay future debts. The most common credit score is the FICO score which ranges from 300–950. The higher your score, the better.


See what's in a credit report from Equifax

A credit score is a number that indicates statistically how likely a borrower is to repay future debts. Most lenders use scores that come from one of the three major credit bureaus: Equifax, Experian and Trans Union. These private national credit bureaus collect information about consumers and keep it electronically in individual consumer credit records. The credit bureaus generate credit scores based on the information in these consumer credit records. Each credit record includes the following data, collected from creditors and public records:

    Identifying information (name, address, employer, Social Security Number, etc.) Debt and payment history on credit cards, student loans, consumer loans, car loans, etc. Previous collections Tax liens, judgments and bankruptcies Inquiries for new credit

The most common credit score is the FICO score. It is one of the credit scores issued by all three of the national credit bureaus.

The FICO score is generated by a mathematical formula (called a scoring model) developed by Fair, Isaac Company. To generate a FICO credit score, a credit bureau runs the data in a consumer’s credit record through its FICO scoring model.

The FICO score ranks consumers on a scale of 300–950. Higher scores indicate lesser risk of default; lower scores indicate greater risk of default.

Most lenders get credit scores directly from the credit bureaus or from a credit reporting agency that typically gets its scores from the credit bureaus. However, some lenders generate their own credit scores or get credit scores from a custom credit score developer.

How to Improve Your Credit

Here are three things you can do to improve a low credit rating:

    Pay your bills on time. This is the single most important thing you can do to improve your credit rating. Be sure to pay at least the minimum amount required by the date it is due. The faster you start paying your bills on time, the quicker your credit rating will improve. Minimize your debt and apply for new credit cautiously. Pay down your high credit card balances. Don’t charge close to your credit limits. The closer you charge to your credit limits, the lower your credit rating will be.

    Tip: On average, lenders would like to see 3 - 4 open accounts; any combination of charge cards, auto loans, etc. Balances on credit cards should be no more than 33% of your line of credit.

    Consider closing accounts you never use. What about keeping accounts open to maintain a credit history; doesn't it have to be with one card for a long period of time? Don’t apply for loans or credit cards that you don’t need. The more you apply for new credit, the more you may appear to be taking on more debt than you can handle, and the lower your credit rating may be.

    Limit your department store cards and finance company loans. The more department store cards or finance company loans you have, the lower your credit rating may be.

    On the other hand, having a very limited credit history can have a negative effect on a credit rating. If you don’t have a credit history, consider opening an account and using it responsibly, making the minimum monthly payments as required. Is it bad to close a bunch of accounts at once, or to make huge changes to your accounts randomly? Review and protect your credit records. Once a year or before applying for new credit, make sure your credit records are accurate and correct them. You can check your credit records by ordering a credit report from each of the three credit bureaus – Equifax, Experian and Trans Union. Or for free at Realty Solution .

    If you’ve been denied credit, you can get a free credit report by following instructions in the adverse action notice. Otherwise, you can receive a copy for a minimal fee.

    Annually, you should check your report at all three bureaus. Each bureau might contain slightly different information.

    If any of your credit reports contains any inaccuracies, contact the credit bureau that compiled the report. The Fair Credit Reporting Act (FCRA) requires the bureau to investigate your disputed items within 30 days. The credit bureau must provide you with written notice of the results of the investigation within five days of its completion, including a copy of your credit report if it has changed based upon the dispute.

    The Federal Trade Commission (FTC) is responsible for enforcing the FCRA. The FTC also publishes consumer-related brochures where you can obtain additional information on credit reports. To contact the FTC, call or write:

Federal Trade Commission
Public Reference Branch
6th Street and Pennsylvania Avenue, NW
Room 130
Washington, DC 20580
Phone: 202-326-2222
Web Sites: and

To order your credit report by phone or Internet, contact:

Equifax Consumer Services
Phone: 1-800-997-2493
Web Site:

Phone: 1-888-397-3742
Web Site:

Trans Union
Phone: 1-800-916-8800
Web Site:

What factors are considered in a credit score

The law is very specific about what may and may not be considered in a credit score.

These factors are considered in most credit scoring systems: can we get specific numbers?

    The amount of credit you have compared to your credit limit The length of your credit history The number and types of credit accounts you have How active you are in applying for new credit Public records pertaining to credit

These factors are NOT considered in credit scoring systems:

    Income Race Religion Gender Marital status Nationality Age Receipt of public assistance

what do credit scores mean and how they benefit consumers

Credit scores speed up the mortgage approval process for most consumers. The truth is that most Americans represent very little risk and have high credit scores. Credit scores help lenders identify—quickly—which consumers are lower risk borrowers. This speeds up the mortgage approval process for most consumers.

Credit scores are not based on human judgment. Credit scores apply the same standards to everyone. Using credit scores helps lenders to treat each consumer objectively. Credit scores are blind to cultural or demographic differences among people.

how much does it count in qualifying for a loan

Whether you are applying for a mortgage to purchase or refinance your home, a good credit history is essential. During the approval process, lenders must determine that you will be able and willing to repay the mortgage debt. To ensure that you will be able to pay off the debt, lenders may look at many factors, including: can we show how much each one counts in comparison to the others?

    Employment history Income and outstanding debt Savings patterns and amount of savings The type and amount of loan requested The amount of down payment or the existing equity in the property

To ensure that you will be willing to pay off the debt, lenders typically look at your credit report and credit score. Your credit score predicts how likely you are to repay the mortgage debt.

Lenders will use your credit score to help them determine:

    What loan types you are eligible for Whether to approve your loan What your interest rate will be