Credit Score

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DEFINITION of 'Credit Score'

A statistically derived numeric expression of a person's creditworthiness that is used by lenders to access the likelihood that a person will repay his or her debts. A credit score is based on, among other things, a person's past credit history. It is a number between 300 and 850 - the higher the number, the more creditworthy the person is deemed to be.

BREAKING DOWN 'Credit Score'

A FICO score is the most widely used credit scoring system. FICO is an acronym for Fair Isaac Corporation, the company that provides the credit score model to financial institutions. There are other providers of credit scoring systems as well. Consumers can typically keep their credit scores high by maintaining a long history of always paying their bills on time and not having too much debt.

A credit score plays a large role in a lender's decision to extend credit and under what terms. For example, borrowers with a credit score that is under 600 will be unable to receive a prime mortgage and will typically need to go to a subprime lender for a subprime mortgage, which will typically have a higher interest rate.

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RELATED FAQS
  1. Can a Best Buy credit card help you build credit?

    A Best Buy credit card can be used to help improve your credit score and credit history as long as you use the card responsibly. ... Read Full Answer >>
  2. Do banks offer FHA loans?

    Many major U.S. banks, including Well Fargo & Company, U.S. Bancorp, Bank of America and Flagstar Bancorp, offer Federal ... Read Full Answer >>
  3. Are personal loans bad for your credit score?

    Taking out a personal loan is not bad for your credit score in and of itself. However, there are several factors that come ... Read Full Answer >>
  4. Is credit counseling as damaging as bankruptcy on my credit report?

    Credit counseling is not as damaging as bankruptcy to your credit report. Credit counseling ends up being noted on your credit ... Read Full Answer >>
  5. Why is it beneficial to innovate financial models and techniques used in quantitative ...

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  6. How does your checking account affect your credit score?

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  7. What do the letters / symbols on credit ratings mean?

    The letters or numbers used to express a credit rating or credit score express the creditworthiness of the individual, business ... Read Full Answer >>
  8. What are the differences between the three national credit bureaus?

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    Although credit rating and credit score may be used interchangeably in some cases, there is a distinction between these two ... Read Full Answer >>
  11. What information do lenders need when I apply for a credit limit increase?

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    Normal information, such as a paid or unpaid notation, usually hits a credit report within 30 days of the close of the billing ... Read Full Answer >>
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