Introduction to Credit Scoring

When you apply for credit—such as a credit card, auto loan or mortgage—the company from which you are seeking credit checks your credit report from one or more of the three major consumer reporting agencies. In addition to your credit report, they will most likely use a credit score, such as a FICO® Score, in their evaluation of credit risk before lending their money to you.

Each lender has its own process and policies for making decisions when reviewing a credit application. Most lenders consider a FICO® Score along with additional information, either from one or more of your credit reports or from supplemental information you provide with your application, such as your income.

What is in a credit report?

Although each consumer reporting agency formats and reports this information differently, all credit reports contain basically the same categories of information.

  • Identifying Information - Your name, address, Social Security number, date of birth and employment information. This information is not used in calculating FICO® Scores; it is only used to identify you. Updates to this information come from information you supply to your lenders.
  • Credit Accounts - Most lenders report information about each account you have established with them. They report the type of credit account, the date you opened the account, your credit limit or loan amount, the account balance, and your payment history.
  • Credit Inquiries - Your credit reports list the inquiries that lenders have made for your credit reports within the last two years. When you apply for a loan, you authorize your lender to ask for a copy of your credit reports. This is how inquiries appear on your reports.

  • Bankruptcies and Collections - Consumer reporting agencies also collect bankruptcy (often found in the public record segment of a credit report) information from state and county courts, and delinquencies reported by collection agencies.

How do I check my credit report for free?

You may get a free copy of your credit report from each of the three major consumer reporting agencies annually. To request a copy of your credit report, please visit: www.annualcreditreport.com. Please note your free credit report will not include your FICO® Score. Because your FICO® Score is based on the information in your credit report, it is important to make sure that the credit report information is accurate.

What if there’s an error on my credit report?

If you find an error on one or more of your credit reports, contact the consumer reporting agency or the organization that provided the information to the agency. Both parties are responsible for correcting inaccurate or incomplete information in your report as required by the Fair Credit Reporting Act.

Equifax Disputes (www.ai.equifax.com/CreditInvestigation/home.action)

Experian Disputes (www.experian.com/blogs/ask-experian/credit-education/faqs/instructions-for-disputing-by-mail/)

TransUnion Disputes (www.transunion.com/credit-disputes/dispute-your-credit)

What is a credit score?

A credit score is a number summarizing your credit risk, based on your credit data. A credit score helps lenders evaluate your credit profile and influences the credit that’s available to you, including loan and credit card approvals, interest rates, credit limits and more.