Understanding Your Credit Report Score

Your credit report score, also called as credit history or credit reputation, is a record of your credit history -- borrowing and repaying. Lenders use your credit history to determine how likely you are going to pay your bills on time. The higher your credit score, the better chance you’ll have to get approved for a loan. With a high credit rating you can get a lower interest loan.

Considering the impact of credit report on your financial life, there is no reason why you don't want to learn as much as you can about its range, meaning or interpretation and scoring system. What is a credit score? What institution is responsible for coming up with these three digit figures? Here, you will find answers to various questions related to credit report and credit score.

What is a Credit Report Score?

This is a three-digit number -- more or less reflects your future credit performance -- that is generated by a relative scoring formula based on information found in your credit report and then compared to information from tens of thousands of individuals. The information includes payment history, available credit, existing debts, new credit lines, and many more.

In the credit economy a credit report score indicates a person's creditworthiness or credit reputation -- the information that lenders can depend on to make decisions regarding the person's credit application. If your credit report reveals that you pay your bills on time and have decent amount of credit available in your account, the lenders would approve your loan application.

However, if you have a credit score range that is below average -- normal range is 300 to 850 and 720-above considered as good scores -- then lenders may not let you borrow more credit. Or, if your application gets approved, it would be for less favorable loan terms.

Who Issue Credit Report Scores?

Fair Isaac Corporation was the first company that develops a credit scoring system -- a system of assigning value to your credit standing. The score was named the FICO score. Today the FICO credit score becomes the standard and the most trusted credit score used by the three major credit bureaus namely, Equifax, Experian and TransUnion.

There are other credit scoring systems offered by different consumer credit reporting services. Since these companies have their own system of calculation of credit rating this means that you have more than one credit score. When you apply for a loan, lenders would request to access your credit report from any of these credit reporting agencies and sometimes they request from more than one of the major credit bureaus.

Free Credit Report and Free Credit Score

The Fair Credit Reporting Act (FCRA) lets every citizen of the United States to obtain a free credit report from each of the three major credit reporting agencies once every 12 months. Just visit AnnualCreditReport.com to know about how to make your request. You will need to provide the following information: name, address, social security number, and date of birth.

Aside from getting free report from the AnnualCreditReport.com, the credit bureaus are mandated by law to provide you free credit reports if you have been denied credit in the past 60 days, you are unemployed or on welfare, and your report contains inaccurate information due to fraud.

Getting your free credit score is, however, different from ordering your free annual credit report. You cannot view your credit score for free. In fact, credit report services usually offer "free" services for 30 day trial period. If you want to check your credit score you will need to sign up for the trial period offer with a credit card.

So, if credit is your main financial sources it is wise that you regularly check your credit report score. By keeping track of any errors, mistakes or inaccuracies that could lower down your score you will be able to maintain a good credit score. With a good credit report score you'll be get the loan that you need every time you apply for one.

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