Once you know what a credit score is, you will probably be wondering who calculates these scores, how it is actually calculated, and what it takes into consideration.
Credit scores are calculated by credit bureaus, (Equifax, Experian, TransUnion et al.) and contrary to popular belief, your score is not one figure across the board at any given time but will vary depending on which bureau is providing it.
This is because the data they each have and use is different, as some lenders and creditors only report their information to one or two bureaus rather than all of the main ones, and others may not report their credit information to any of the larger bureaus. The credit scoring models used by the major credit bureaus also tend to be different.
Generally speaking, the main factors taken into account when calculating your credit score are as follows:
- The number and types of accounts you have
- The amount of credit used and owed, usually as a percentage of the credit available
- The length of your credit history
- Hard credit inquiries
- Your payment history
As the credit scoring models do vary across different companies, keep in mind that there may be other factors considered alongside or instead of these mentioned, but these factors will more often play a part in the scoring.
Depending on the industry you are trying to get credit for, they may also look at a credit score which shows them data more specific to that industry. For example, an auto lender that you are approaching to buy a car may use a credit score which emphasises your payment history with auto loans, as opposed to a credit card company which may use a credit score which looks more at your history of credit card repayments.
Generally speaking, a higher score indicates that you are lower risk and therefore increases your chances of being considered for new credit.
Has our credit score series has made you curious to know more about your credit score?
You can access a detailed copy of your own credit report through CheckMyFile.*
*Where you access the services of CheckMyFile through the link above, Lendwise will receive a small affiliate fee.
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