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.

INVESTOPEDIA EXPLAINS '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. What's the difference between debt consolidation and debt settlement?

    Debt consolidation and debt settlement are both financial strategies for improving personal debt load, but they function ... Read Full Answer >>
  2. What's the difference between a credit rating and a credit score?

    Although credit rating and credit score may be used interchangeably in some cases, there is a distinction between these two ... Read Full Answer >>
  3. What are the differences between the three national credit bureaus?

    There are several different credit bureaus but only three that are of major national significance: Equifax, Experian and ... Read Full Answer >>
  4. 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 >>
  5. What information do lenders need when I apply for a credit limit increase?

    Depending on the credit increase amount that is requested and the length of time the borrower has held the line of credit, ... Read Full Answer >>
  6. What is a good credit utilization ratio?

    Your credit utilization rate is a representation of the percentage of your current borrowing ability being used; basically ... Read Full Answer >>
  7. How long does it take for items to show up on my credit report?

    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 >>
  8. Does cosigning a loan affect a credit score?

    Cosigning for a loan does not affect a credit score unless the other person defaults on the loan and the cosignor does not ... Read Full Answer >>
  9. How often is my credit score updated?

    A consumer's credit score usually updates at least once every 30 to 45 days, and in some cases almost daily, depending on ... Read Full Answer >>
  10. Why don't I have a credit score?

    Not having a credit score usually means there is no credit history for the credit bureaus to assess. Having no credit score ... Read Full Answer >>
  11. Do I need to know all three of my credit scores?

    Credit information is often not reported with the same accuracy across all three credit bureaus, so it is important for consumers ... Read Full Answer >>
  12. Does marrying someone with bad credit affect my credit score?

    A credit rating is an assessment of an individual's creditworthiness. This evaluation is based on an individual's history ... Read Full Answer >>
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