What Is My Credit Score

Many people have wondered about their credit score and what it is. They may be familiar with their credit reports that are generated by the big three credit reporting agencies. Equifax, Experian and Trans Union are official credit reporting agencies (CRAs) that keep detailed records of everyone’s credit history.

Whenever a consumer uses a credit account, the credit lender sends a monthly report in to one or more of these credit reporting agencies. The credit record shows payment history and if a payment is missed, made on time, or if it is paid late. It shows all the credit accounts a consumer has in one report. The details include payment history, high balance, credit limits, payment amounts and other facts about the consumer’s credit paying history. It also shows what accounts are open or closed, and if closed, who closed the account. Some accounts may be determined to be adverse, while others are listed as positive. There are many more details contained on credit reports about personal spending habits.

Once the credit reporting agency has the monthly reports compiled, they can look at the details and come up with what is commonly termed a credit score. It is harder to find a credit score than a credit report. There may be a small fee to view your credit score. Some companies offer a free look at credit scores if you sign up for their credit protection plan that involves a monthly fee. That is mostly a marketing device.

If you are taking out a loan from a bank or other lender, you can just ask them, after they pull your credit report, what is my credit score? They should willingly tell you that for free. There should be 3 credit scores, one from each of the big three credit reporting agencies. Each score will be a little different for most people. This is because each CRA has a slightly different method for calculating credit scores.

The concept of credit score was developed in 1956 at a company headed up by two men, Bill Fair and Earl Isaac. They developed a method for assessing personal credit risk or worthiness that now is referred to as the FICO score. FICO is the registered trademark name of their corporation, the Fair Isaac Corporation.

FICO scores balance out certain parts of the credit record to come up with an estimated number that relates to credit risk. A credit score of 850 is the highest and 300 the lowest. Most people fall in the area of 650 to 799. Loan interest rates are determined for an individual or company by their FICO score. Low score equals high rates, and vice versa. The average score is 723. Excellent scores are 800 to 850, good scores from 650 to 799, fair scores between 620 and 679, poor below 620 and bad scores fall below 580.

A credit score is not something the individual can calculate; it is necessary to find a free one or pay to see your credit score, unfortunately. Viewing free online credit records is mandated; viewing credit scores is not. But, if you have a good credit record, you should have a good to excellent credit score.