Understanding the Credit Score
Understanding the Credit Score
You’ve heard of a Credit Score before, but do you actually know what it means? In this lesson we will get started with the basics.
Background
Your Credit Score is a 3 digit number (300–850) that signals your “creditworthiness” or how likely you are to repay a loan.
Banks and Lenders use this as one of the primary factors when deciding whether to approve you for a loan or credit card.
In both of these cases you will be extended a line of credit. Credit is simply borrowed money that you can spend in the present under the premise that you will pay it back some time in the future.
Where does your Credit Score come from?
Credit Scores are generated via reports by the 3 main credit bureaus: TransUnion, Equifax, Experian.
These 3 credit bureaus use different credit scoring models such as FICO and VantageScore in order to generate your score.
Since there are different models available, your credit score can vary among credit bureaus. However, most models look at similar factors when determining your score; so your score will be close across all 3.
It’s important to note that while your credit score factors in your credit history, it does not consider things such as personal information (race or gender), income or employment history.
Read “Understanding the Credit Score” on a larger screen, or in the Medium app!
