Credit Score Meanings

Credit scores can be viewed as a grade for your financial behavior. They are complex mathematical algorithms that factor large amounts of financial information to produce a single number. This number represent to lending companies the risk involved in lending you money.

There are many different types of credit scores, but they all share the same basic principle: Past + Current = Good Estimator of Future. Credit score meanings is always the same – if you where not responsible with your financials in the past, chances are you will continue to behave irresponsibly, and vise versa.

Bad grade (low credit score) means that lenders can’t trust you to make payments on time, so they will not want to lend you money. A good grade (high credit score) means that you can be trusted to pay back your loans, so lender will want to lend you money and will offer you their best terms.

There are 3 major credit bureaus that collect consumer information, store it in their files and sell credit scores to lending companies. They are Equifax, Experian & TransUnion.

Your financial data is stored in one file, known as your Credit Report. Each of the 3 major credit bureaus has a credit report with your name on it. Each of them sells this report (and score) to lending companies.

The credit score most commonly used is called FICO, with over 90% of lenders using it.

Credit reports and scores are regulated by the Fair and Accurate Credit Transaction Act (FACT Act), enacted on 2003. It entitles you to receive a free copy of your credit report from each of the 3 major credit bureaus every 12 months (See Free Annual Credit Report). It also entitles you to receive your credit score upon request, but not for free.

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