Credit scores

You are here: Home » Credit scores

Credit-scores

What is a credit score?

Why don’t I have a credit score?

What are score factors?

How often do credit scores change?

What is the Credit Score range?

What is the score range for VantageScore®?

What is a good credit score?

Is there just one credit score?

What information goes into calculating a credit score?

Will I be penalized for shopping around for the best interest rate?

Do lenders and creditors look at all three credit reporting agency reports and credit scorescalculated using information from each report before approving a credit or loan application?

Do inquiries for preapproved offers affect a credit score?

Do finance companies have a negative impact on a credit score?

Does having too many credit cards affect a credit score?

If my spouse had bad credit before we were married, will that affect a credit score?

Does Cosigning for a loan affect a credit score?

Do late payments affect a credit score?

Does renting or leasing a home affect a Credit Score in any way?

Do inquiries affect a credit score?

Does every inquiry affect a credit score?

Can I use a credit score as leverage for a lower interest rate when seeking a loan or line of credit?

Who or what decides if I get my loan?

My credit score is excellent, why have I been refused for credit?

How is my credit score calculated?

My credit score has improved over the last few months, will lenders still see my previous scores?

Can I find out my credit score?

What is a credit score?

A credit score is a numerical rating that attempts to measure a borrower’s creditworthiness. The score indicates the borrower’s general payment behaviors—summarizing how often the person pays their bills and obligations on time. A high credit score does not guarantee that a loan applicant will never default on a mortgage; however, that person represents a statistically smaller risk to a lender than a person with a low score. Lenders and creditors, therefore, are more likely to approve loans and offer their mostfavorable terms to people with the highest scores.

Why don’t I have a credit score?

Credit scoring models cannot generate a score without enough credit information. If you have little or no credit history, you probably will not have a credit score available.

What are score factors?

Score factors or score factor codes are provided with a credit score to explain how items in your credit report influenced the score. These codes can help you understand which items had the greatest impact.

How often do credit scores change?

If you have a poor credit score then you may be wondering how long it will take to improve or if it’s possible to see a change in the short-term. Maybe you’re just aiming for a certain score and want to know what makes a score change and how often it occurs. The truth is, a credit score can change daily and may be affected by a number of things, including loan applications and on-time payments. The effect may be immediate or may take 30-60 days to show up, depending on how soon it is reported.

What is the credit score range?

There are many different credit scores with differing ranges. As a result, it is possible for two different scores to represent the same level of lending risk. When you request a credit score from Experian, you will receive not only a score, but also an explanation of what the number represents in terms of how lenders will view your creditworthiness. If you have a good Experian credit score, you likely will have a good score with lenders, even if the number is different.

What is the score range for VantageScore®?

One of the unique features of VantageScore is the scale it uses. Scores range from 501 to 990 in groupings that approximate the familiar academic scale, making it easier for you to understand your score.

A: 901—990

B: 801—900

C: 701—800

D: 601—700

F: 501—600 (High Risk)

Keep in mind that there are many different credit scores in the market and the score range will vary by model.

What is a good credit score?

Because there are many different credit scoring systems with different scales, a “good” credit score depends on the scoring system used by your particular lender. However, you can get a very good idea of whether you have a “good” credit score by getting a credit score and report from myfico.com. If you have a “good” credit score from myfico.com, you likely will have a “good” credit score with your lender.

Is there just one credit score?

One of the most common myths about credit scores is that there is only one credit score. Web sites or financial advisers who claim there is only one “real” credit score either are misinformed or are being misleading. In fact, there are many different credit scores used by lenders (according to some estimates, more than 1,000), although some scores are used more than others.

While there are many credit scores on the market, VantageScore® is the first credit score developed jointly by Experian and the other national credit reporting companies, TransUnion and Equifax.

What information goes into calculating a credit score?

Credit scores may come from several sources. Lenders may request that a credit score be provided along with your credit report. Credit reporting agencies provide the service of applying the credit scores from a number of credit score developers. Lenders specify which credit score they want delivered with the credit report. Credit scores may also be calculated by mortgage reporting companies that compile your credit reports from each of the national credit reporting companies and then deliver the combined reports and scores to the lender. Lenders may also apply their own, proprietary scores after receiving your credit report.

Will I be penalized for shopping around for the best interest rate?

Too many inquiries may have a negative impact on your credit score. However, most recently developed credit scores recognize when a consumer is shopping for the best rates and either ignore multiple inquiries or count them as only one inquiry if they occur within a specific period of time. In such cases, shopping around for a home or a car will have little or no impact on a credit score if it’s completed within 45 days.

Do lenders and creditors look at all three credit reporting agency reports and credit scores calculated using information from each report before approving a credit or loan application?

Not always. Most mortgage lenders will look at reports from all three credit reporting agencies and credit scores calculated using information from each, but other lenders may use reports and scores from two or just one of the credit reporting agencies.

Do inquiries for preapproved offers affect a credit score?

No. Only applications for credit initiated by the consumer will affect your score. Inquiries into your credit for account review purposes as well as preapproved offers of credit have no effect on credit scores.

Do finance companies have a negative impact on a credit score?

The presence of a loan finance account can negatively affect your score because these accounts often carry high interest rates which may hamper your ability to repay and which many lenders view negatively. However, when paid on time, these accounts can also have a positive effect on your score (if the loan helps you to make your payments in a more timely fashion, for example).

Does having too many credit cards affect a credit score?

Having too many credit cards with either high balances or large amounts of credit available can negatively impact risk scores, depending on the overall credit history.

If my spouse had bad credit before we were married, will that affect a credit score?

If you hold a joint credit account, have cosigned a loan or have authorized use of another person’s credit, these items could affect a score if they appear on your credit report. It’s important that joint account holders or authorized users understand that their credit behavior does affect the other joint account holder or main account holder.

A credit account held solely in the name of your spouse, your child or any other family member cannot impact your credit score. However, in community-property states, all debt acquired during a marriage is considered a joint debt, regardless if the account is joint or in the name of an individual spouse.

Does cosigning for a loan affect a credit score?

Absolutely. By cosigning, you are accepting full responsibility for the debt if the other person does not pay as agreed. A cosigned account will appear on both your credit history and the other person’s. All loans and credit card accounts that appear on your credit report will impact credit scores.

  

Do late payments affect a credit score?

Paying bills on time is generally the single most important contributor to a good credit score. Being late on any bill, for any length of time, is a possible indication of future nonpayment of debt and is almost always viewed negatively by lenders. Any late payments will remain on your credit report for up to seven years.

Does renting or leasing a home affect a credit score in any way?

Yes, because your rental payment history is now part of your standard credit report, it may be incorporated into certain credit scores, such asVantageScore® and Experian’s PLUS Score®.

This will allow many who previously didn’t have a credit history to become scoreable for the first time and begin building and rebuilding credit through the responsible payment of rent.

Do inquiries affect a credit score?

Inquiries placed on your credit report when you apply for new credit can impact your credit score. However, inquiries have a relatively small impact on your credit score. In a credit scoring model, there are stronger indicators of future payment performance, such as past payment history and use of credit. Inquiries are rarely, if ever, the only reason for poor credit scores. They become significant only if there are other issues already lowering your score, such as late payments or very high debt.

Does every inquiry affect a credit score?

Anytime your credit report is pulled—including when you order a copy of your credit report directly from the credit reporting agency—an inquiry is added to your report. Only some of those inquiries appear to creditors and therefore impact your credit score. Inquiries that were made for credit cards or loans for which you applied will be shown to creditors and are counted in a credit score. Inquiries added when you request a copy of your own credit report or when an employer checks your credit report do not appear to creditors and will not affect your credit score.

When you request your credit report directly from Experian, it shows you all inquiries. This is done so you know who has been looking at your credit. Some inquiries on your report are accompanied by a description of why the report was pulled.

Can I use a credit score as leverage for a lower interest rate when seeking a loan or line of credit?

It is never a bad idea to work with issuers and lenders to reduce your interest rate. You definitely have more leverage if a credit score puts you in the low-risk range. However, because there are many different credit scores, the model used to calculate the score you obtain, and the score itself, may be different than the one the lender uses in making its decision. For instance, you may get a generic credit risk score from Experian, but an auto lender might use its own custom scoring model with a different scale. Consequently, the numbers won’t be the same but will likely represent a similar level of risk.

Who or what decides if I get my loan?

Banks, credit card companies, auto dealers, retail stores and other lenders decide if you get your loan. Most businesses that issue credit or loans use credit scores to quickly summarize a consumer’s credit history, saving the need to manually review an applicant’s credit report and providing a better, faster decision. Although many additional factors are used in determining whether or not you receive the credit you applied for—such as an applicant’s income versus the size of the loan—a credit score is a leading indicator of one’s basic creditworthiness. Credit reporting agencies do not make lending decisions.

My credit score is excellent, why have I been refused for credit?

Your Experian credit score is only a guide to help you to see how your credit report information may affect a lender’s credit decision. It is not a guarantee that you will, or won’t, be granted credit. You don’t have a single credit rating, as every lender uses a different formula. Your credit score also changes over time, as your circumstances change.

Each lender takes different information into account when producing a credit score for an individual credit application and this is based upon their own internal lending policies. They may use different formulas to calculate credit scores and may even have different scores for different products. This means that nobody can tell you exactly how lenders score individual credit applications.

How is my credit score calculated?

A score is derived in part from a consumer’s payment history. That is, do you pay credit cards, mortgage, and car-loan payments on time, and is your history free from ‘past-due’ amounts, bankruptcies, foreclosures, wage attachments, liens, etc.? As you might imagine, the more recent and larger a negative item, the further it drags your score down.

Amounts owed by a person also factor into part of your score. The total amount owed, whether you are close to the maximum amount on credit cards, how many accounts you have, and what balances remain on installment loans all come into play in this area. The larger the debt you have on a card and the closer that amount is to your card limit, the more likely it is that your score will drop.

Another part of your score comes from the length of your credit history, including how long specific accounts have been established and the length of time since you used these accounts. Another part of your score is determined by how many new accounts and requests for credit you have. Remember, a score is just one important indicator of your creditworthiness.Other key factors include your assets, your liquidity and your monthly expenditures.

My credit score has improved over the last few months, will lenders still see my previous scores?

Lenders do not see your Experian credit score or your previous scores; this information is only accessible by you. When you apply for credit, the lender will assess your application based on the most recent information on your credit report. Any old information that has since changed will not be seen by the lender when making their assessment.

Each lender takes different information into account when producing a credit score for an individual credit application and this is based upon their own internal lending policies. They may use different formulas to calculate credit scores and may even have different scores for different products. This means that nobody can tell you exactly how lenders score individual credit applications.

Can I find out my credit score?

Credit scores are numbers lenders use to help them decide how likely it is that they will be repaid on time if they give you a loan or a credit card. Credit scores also are called risk scores because they help lenders assess the risk that you won’t be able to repay the debt as agreed. Your scores are generated by statistical models using elements from your credit report. However, credit scores are not stored as part of your credit.