Q:

What is a credit score?

A:

Quick Answer

A credit score is a way to measure a person’s credit risk based on factors from their credit history. The most common score used by businesses was developed by the Fair Isaac Company, and it is known as a FICO score. An individual’s FICO score can range from 300 to 850, with a higher number viewed as a more favorable score.

Continue Reading
What is a credit score?
Credit: KLH49 E+ Getty Images

Full Answer

Many factors go into generating a credit score. The three major credit bureaus use information from individual credit reports to generate FICO scores. A few factors that are considered are a person’s payment history, the amount of money owed, the type of outstanding credit on the report and the length of an individual’s credit history. Payment history and overall debt are given the most weight in the scoring process.

As the credit bureaus use whatever information they have on file to determine a score, it is possible to have up to three different FICO scores at any given time. Since a higher credit score can lead to greatly reduced borrowing costs, it is important to monitor credit reports for accuracy. Though everyone is entitled to a free copy of each of their three credit reports on an annual basis, most credit scores are not available without a cost.

Learn more about Credit & Lending

Related Questions

Explore