Credit scores made simple

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These days, it’s not just your lenders that care what your credit score is.

Insurance companies look at it, as do landlords and even employers to screen candidates, says Glinda Bridgforth, author of “Girl, Get Your Credit Straight!”

Typically, having a low credit score means you’re considered a high credit risk to lenders. As a risky borrower, you might face more fees, higher interest rates and even get turned down for jobs and loans.

Of course, businesses will consider other factors besides your credit score when deciding whether to approve you and at what rate — they might factor in length of employment, income, the number of years lived at your current residence and the amount of debt you have, says Bridgforth.

Still, lenders heavily rely on your score to determine your creditworthiness. Asked whether credit scores are more important than credit reports to lenders, John Ulzheimer, president of consumer education for, says that the credit score has rendered the credit report useless, since it largely automates the tedious process of analyzing credit reports.

Factors that make up your score

That doesn’t mean your credit report isn’t important. Your credit risk score is based on your credit report. Certain sections of it get considered in the calculation of a credit score.

Your identifying information won’t count toward your score and neither will your consumer statement, if you have one. Soft inquiries created when you requested your own credit report or existing creditors pulled your file for an account review don’t count either.

The sections that do matter to your score include public records — judgments, liens and bankruptcies — third-party collections, hard inquiries and your account history. The account history is the meat of your score, says Ulzheimer. It’s where many aspects of your accounts will be considered (link to account history section “How credit reports work”) .

Numerous scoring models exist, but the one used by most lenders is the FICO or FICO Classic score, created by Fair Isaac Corp. FICO scores range from 300 to 850, with higher numbers being better than lower scores. The median FICO score in the United States is a 723. For the purposes of this article, we will focus on the factors of your credit history that affect your FICO score.

Check out this chart to see exactly what comprises a FICO credit score and how to improve each factor.

Once you get your credit report, you’ll notice that the information contained in it is organized in sections: your personal information, credit summary, account information, inquiries, collections and public records, along with summaries of your rights under state law and the Fair Credit Reporting Act, plus instructions on how to dispute information found in your report.

When to buy your credit score

Check your credit score six months in advance of applying for a large loan, says Craig Watts, the public affairs manager for Fair Isaac Corp. That way, you have time to make changes that could improve your score, such as paying down large account balances.

“For general maintenance purposes, it’s a good idea to check your score at least once a year because if your score changes significantly, it’s an indication that something is not right,” he adds.

Checking your FICO score a few days in advance before applying will give you a number that should be close to what the lender will get, but if the lender gets a slightly different number, don’t be overly alarmed. Ulzheimer says the lender could be using a score based on a different credit report. They could be using a different version of the FICO score or even an industry-specific FICO score, called an industry option score. “It’s still going to be close,” he says.

Scores improve gradually 

“It’s important to be patient with the process when it comes to increasing your credit score,” says Bridgforth. “Once you’ve fixed all errors, are paying your bills on time, reducing balances by paying more than the minimum payments and lowering interest rates as much as possible, be patient and let time work to your benefit. I know it can feel like you’re watching grass grow, but if you’re consistent with following these healthy habits, your credit score will definitely increase and you’ll be well on your way to getting your credit straight.”