Credit Score

A credit score is a number based on a credit files, which represents credit ability of a person and basically how likely they are to pay their bills.

It is bast on statistical analysis of credit information usually from one of the three major credit bureaus that include Experian, TransUnion and Equifax. Contrary to popular belief, or at least by those just researching credit, a credit score is not based on income.

Credit scores can be calculated different ways. The most common credit score is knows as FICO, which naturally was developed by the Fair Isaac Corporation.

Mortgage lenders use these various systems to judge risks when deciding the possibility that a borrower may default on mortgages with a lender.

Credit scores have proven to be fertile grounds in determining risk in relation to credit and insurance. In turn, people with better credit score receive increased benefits.

Something Americans are not always aware of is that they are able to get one free credit report every 12 month cycle. This is not a credit score, though. You can get this free credit report on annualcreditreport.com.

FICO credit score ranges between 300 and 850. VantageScore score ranges from 501-990.