Your credit score

Financial Education
Oct 27 2015

What exactly is a credit score?

A credit score is a formula that is used to predict risk for lenders. Credit reports, account history, and applications are all used to create your credit score. The goal is to see if you consistently pay your accounts on time or if you are consistently delinquent in making payments. All this things are analyzed and computed into a number that is your credit score.

Lenders use credit scores to help decide:

  • Whether to issue a new account or loan
  • Raise the credit limit on an existing account
  • Decide what interest rate to charge on a new or existing loan


It’s important to understand that your credit score is never a single number. It can vary; depending on which of the three major credit bureaus supplied the credit information used to calculate it, what kind of loan is being considered, and what formula the individual lender uses to calculate it.


Keep in mind:

  • Your credit score can change frequently as information is updated in your credit reports.
  • Lenders may use different credit scoring formulas customized for their loan products when calculating your score.
  • Credit scores are calculated using the information in your credit report, even if that information is not correct.


The two most important factors that go into your credit score are your payment history (have you paid your bills on time?) and the amounts you owe (how much debt do you carry?). Together, these categories make up about two-thirds of your credit score. That means if you want to improve your credit score focus on paying your bills on time and paying down debt.


How can I get my credit score?

You can receive free credit reports annually by logging on to It’s an excellent idea to check your credit report and find out what your score is at least three months before a major purchase such as a home or car, to give yourself time to correct any mistakes or problems.


Keep in mind that the older the negative information becomes, the less of an impact it may have on your score; and new positive credit references can help improve your score, if your credit report still contains negative information. That’s why it is important, if you’ve had credit problems in the past, to establish positive credit references to boost your credit score.


Want more financial tips? You can learn more about this subject and view other financial education resources on our website.

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