Credit, Scores, & Reports

When you’re applying for credit—whether it’s a credit card, a car loan, a personal loan or a mortgage—lenders want to know your credit risk level.

In other words, “If I give this person a loan or credit card, how likely is it that I will get paid back on time?” There are three major credit reporting agencies (Equifax, Experian and TransUnion) in the United States that maintain records of your use of credit and other information about you. These records are called credit reports, and lenders will want to check your credit report when you apply for credit.

In most cases, lenders will also want to know your credit score. What is a credit score? A credit score is a number that summarizes your credit risk, based on a snapshot of your credit report at a particular point in time. A credit score helps lenders evaluate your credit report and estimate your credit risk.

The most widely used credit scores are FICO® scores, the credit scores created by Fair Isaac Corporation. Lenders can buy FICO® scores from all three major credit reporting agencies. Lenders use FICO® scores to help them make billions of credit decisions every year. Fair Isaac develops FICO® scores based solely on information in consumer credit reports maintained at the credit reporting agencies. Your credit score influences the credit that’s available to you and the terms (interest rate, etc.) that lenders offer you. It’s a vital part of your credit health.

Understanding your FICO® score can help you manage your credit health. By knowing how your credit risk is evaluated, you can take actions that may lower your credit risk—and thus raise your credit score—over time. A better FICO® score means better financial options for you.