What is a credit score?
A credit score is a three-digit number, between 300 and 850, that predicts how likely you are to repay debt on time. Based on your credit history, it helps lenders decide whether to approve loans, credit cards, or housing, and determines your interest rates. Higher scores indicate lower risk.
How are scores calculated?
Different companies calculate scores using information from credit reports generated by the major credit reporting agencies: Equifax, Experian, and TransUnion.
The five components of the credit score are:
- Payment History (35%): Paying bills on time
- Amount Owed (30%): Amount of debt compared to credit limits
- Length of Credit History (15%): Age of credit accounts
- Credit Mix (10%): Blend of revolving, installment, and real estate accounts
- New Credit (10%): Frequency of new account and inquiries
Why are there multiple credit scores?
There are multiple credit scores because different lenders use different models, and your data may differ between the three credit reporting agencies. The two most widely used score models are FICO and Vantage.
What is FICO®?
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