Learning Center

What is a Credit Score?

A credit score is a number that lenders use to determine an individual's financial risk factor. Credit scores are calculated according to statistical models. Designers of credit scoring researched and reviewed millions of consumers in order to create a model that could most effectively predict future credit behavior. The scores range from 300 to 850. Scores in the high 600s are considered good. Scores in the high 700s are considered excellent. Credit scores are obtained through three nationwide credit reporting companies: Experian, Equifax and Trans Union.

How is a Credit Score Calculated?

35% is based on payment history (on-time and delinquent payments)
30% is based on capacity (available credit vs. current balance on credit cards)
15% is based on the length of credit
10% is based on the accumulation of debt in the past 12-18 months (number of inquiries; opening dates)
10% is based on the mixture of credit (installment loans, such as car loans, and revolving accounts, such as credit cards)

Tips for Improving and Managing your Credit Score

Obtain a copy of your credit score and check your credit report regularly.
Pay down your credit cards. Credit cards that are near or at capacity reflect negatively.
Take a look at the information on your credit report and make sure it's accurate. Correct any information on your credit report that is not accurate by contacting the three credit reporting agencies.
Don't open new credit cards just to increase your available credit. Having too many credit cards can have a negative effect on credit scores.
Don't close all of your credit cards. You need to have capacity. It's a good idea to have two major credit cards.
Move revolving debt to installment debt. It's better for credit purposes to have more installment loans in relation to revolving loans.
If your credit is damaged or if you haven't established a credit history, consider opening a few new accounts and paying them off on time. Avoid opening several new accounts at once.
If you fall behind on your bills due to illness, unemployment or other emergency issues, write a short explanation and mail it to the three credit reporting agencies. This will not eliminate or remove late payments but it will help keep the lines of communication open to your lenders.
Make your payments on time. It can take 24 months to restore your credit after only one late payment.
Contact a reputable nonprofit agency if you need help managing your credit. Consumer Credit Counseling Services (CCCS) can be reached at: 800-388-2227 or www.cccsintl.org.

Know your Rights

The Fair Credit Reporting Act (FCRA) is a federal law that regulates how credit reporting agencies use your information and restricts who has access to your information. The following is a list of some of your rights, according to the FCRA.

Provided that you present proper identification, credit reporting agencies must give you the information contained in your file.
Credit reporting companies may not provide your credit report to any party unless there is a permissible purpose, such as the evaluation of an application for a loan, credit, service or employment.
An agency may not give your credit information to an employer or potential employer unless you first give that employer written permission to request your credit.
If you tell a credit reporting company that your file contains inaccurate information, the agency must promptly investigate the matter. If the investigation fails to resolve the dispute, you may add an explanation statement to your credit file.
You may request an Active Duty Alert by calling any of the three nationwide credit reporting companies. This alert removes your name from pre-screened credit offers for two years.

How to Get a Copy of your Credit Report

You can obtain a copy of your credit report through any of the three credit reporting companies, Experian, Equifax or Trans Union.

Equifax
web: www.equifax.com
phone: 800.685.1111

Experian
web: www.experian.com
phone: 888-397-3742

Trans Union
web: www.transunion.com
phone: 800-888-4213

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(1.866.535.2262)

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What is a Credit Score?

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