Your credit report
Your credit report is a summary of your credit history.
Your credit report is created when you borrow money or apply for credit for the first time. Lenders send information about your accounts to the credit bureaus, also known as credit reporting agencies.
Your credit score
Your credit score is a three-digit number that comes from the information in your credit report. It shows how well you manage credit and how risky it would be for a lender to lend you money.
Your credit score is calculated using a formula that evaluates the information in your credit report.
Note that you:
- get points if you use your credit responsibly
- lose points if you have trouble managing your credit
Your credit score will change over time as your credit report is updated.
How Credit Scores Are Calculated
It’s impossible to know exactly how much your credit score will change based on the actions you take. Credit bureaus and lenders don’t share the actual formulas they use to calculate credit scores.
Factors that may affect your credit score include:
- how long you’ve had credit
- how long each credit has been in your report
- if you carry a balance on your credit cards
- if you regularly miss payments
- the amount of your outstanding debts
- being close to, at or above your credit limit
- the number of recent credit applications
- the type of credit you’re using
- if your debts have been sent to a collection agency
- any record of insolvency or bankruptcy
Lenders set their own guidelines on the minimum credit score you need for them to lend you money.
If you have a good credit score, you may be able to negotiate lower interest rates. However, when you order your credit score, it may be different from the score produced for a lender. This is because a lender may give more weight to certain information when calculating your credit score.
