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What is a Credit Score?

A credit score is a statistical scientific method that is used to assess an individual's credit worthiness based on their credit history and current credit accounts. Credit scores were developed in the 1950s, but came into increasing use in just the last two decades.

Most lenders use credit scores to determine your credit risk. Consumers have three credit scores, one for each of the three credit bureaus: Experian, TransUnion, and Equifax. Each score is based on information the credit bureau keeps on file about you, which is submitted by your creditor(s). Your credit score changes as the information on file changes.

Your credit score is determined based on the following categories:

  • Payment History (timeliness of payments on accounts)
  • Amount owed (outstanding balances on accounts)
  • Length of Credit (how long you have had credit)
  • Types of Credit Used (revolving, installment, etc.)
  • New Credit (recent accounts or credit inquiries)

The ranges for credit scores are as follows:

  • 760 - 850 - PERFECT
  • 700 - 759 - Good
  • 650 - 699 - Average
  • 620 - 649 - Mediocre
  • 350 - 619 - Major Problems