Explaining a Credit Score

In addition to considering your employment and income, creditors use a credit score to decide whether or not they will issue credit to you. Your credit score is based on information that credit bureaus collect from credit applications, creditors and public records. Before applying for credit for important purchases, such as a mortgage or car loan, you should be aware of your score.

Function

A credit score, created by Fair Isaac and Company, is a three-digit number that a credit bureau gives a lender to determine a consumer's creditworthiness. Creditors use credit scores to determine interest rates and payments for credit applicants.

Types

Beacon, Empirica and Experian/Fair Isaac Risk Model are the names of the credit scores issued by Equifax, Experian and TransUnion, respectively.

Features

The components of your credit score, include amounts owed, credit history length, credit type, inquiries and payment history.

Considerations

Credit scores fluctuate depending on when a creditor reports information, and credit scores vary among the credit bureaus.

Warning

Many creditors, such as mortgage lenders, for example, use their own internal credit scores in addition to those issued by the credit bureaus for credit approval.