Your credit report is an electronic file that provides a summary of banks’ experiences with lending you money. Everybody gets a credit report as soon as they open a credit card or loan. The report is tied to your name and social security number, and is yours for life. Your credit score is a number between 300 and 850 that reflects the overall information in your credit report. Basically, credit is about risk. The higher your credit score, the less likely you are to take out a loan and then not repay the bank.
Where do credit scores and reports come from?
Three companies maintain credit reports: Experian, TransUnion, and Equifax. Banks provide information about you to these bureaus including your credit limit or loan amount and whether you pay your bill on time. The bureaus then compile this information and resell it to the banks for making future lending decisions. A fourth company, called the Fair Isaac Corporation (FICO) provides the credit bureaus with the complex equations that determine your credit score–also called a FICO score.
Credit 101
We’ve broken down the essentials of credit and how it works into a few easy articles. Take five minutes to learn everything you need to know about this powerful financial tool: your credit.
- What is a credit score and credit report?
- How is my credit score and credit report used?
- How do I get good credit?
- Why do I have bad credit?
- What credit score do I need for a new credit card?
- How do I know what my credit score is?
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