What’s in a Credit Score Anyway?

Ahhhh….the mystery of credit scores.  Those secret little numbers that come from the big three credit bureaus (Experian, Transunion, Equifax).

Your scores can make or break that loan application you filled out for a new mortgage, car loan, home improvement loan…really just about any type of loan.  Many employers review your credit before making hiring decisions.  Governing bodies that review applications for professional licenses look at your credit to determine acceptance.

With so much riding on these numbers, it would be helpful to understand how they are derived.  Would it not?

Creditors (entities that lend you money) report information from your account (i.e. loan amounts, payment history, balances, etc.) to the main credit bureaus.  These bureaus then compile the data from your account(s) and using complex algorithms, come up with a score that represents your overall credit worthiness.  Higher is better.

Ugh!  Math….I know.  But you really don’t need to understand how the formulas work.  You just need to know what information the formulas value and how much importance is placed on the various types of information that go into the credit score bowl of soup.

Watch the video below for more….

This entry was posted in Credit and tagged , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s