Did you know that creditors, mortgage lenders, and even some employers may reference your credit score to approve or deny you an opportunity? We’re here to help you understand the basics of credit reports, credit scores, and the financial factors influencing your credit outlook so you can take charge of your lending fate.
Credit report vs. credit score.
Although commonly assessed together, credit reports and credit scores are not the same. The Federal Trade Commission defines a credit report as including “information on where you live, how you pay your bills, and whether you’ve been sued or have filed for bankruptcy.” Once assessed, your credit report is made available by national reporting companies such as Equifax, Experian, and TransUnion, who provide the information to creditors, insurers, employers, and other businesses.
Based on your credit report, a numerical model is used to assign a score. Fair Isaac Corporation (FICO) and VantageScore are the two most common scoring models, with FICO being the most frequently recognized. FICO Scores range from 300 to 850. According to credit reporting company Experian, 66 percent of Americans have a good FICO Score, ranging from 670 to 850.
Credit score influencers.
No matter the scoring system used, credit scores are influenced by key financial elements found in your credit report. These include payment history toward debt, total debt, length of credit history, and recent credit behavior. There are components within each, and all elements are not considered equal. In both the FICO Score and VantageScore methods, payment history is the most influential factor.