Credit report basics

Credit score basics

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Life events and credit

• Is there just one credit score?
• What is a credit score?
• What is a VantageScore^SM?
• What information goes into calculating a credit score?
• Why don't I have a credit score?
• Who calculates credit scores?
• How often do credit scores change?
• What is the credit score range?
• What is the score range for the VantageScore?
• What are score factors?
• Will I be penalized for shopping around for the best interest rate?
• Who … or what … decides if I get my loan?
• Can I use a credit score as leverage for a lower interest rate when seeking a loan or line of credit?
• What is a good credit score?
• Do lenders and creditors look at all three credit reporting agency reports and credit scores calculated using information from each report before approving a credit or loan application?
• Do preapproved offers get considered as new credit and affect a credit score?
• Do finance companies have a negative impact on a credit score?
• Does having too many credit cards affect a credit score?
• If my spouse had bad credit before we were married, will that affect a credit score?
• Does co-signing for a loan affect a credit score?
• Do late payments affect a credit score?
• Does renting or leasing a home affect a credit score in any way?
• Do inquiries affect a credit score?
• Does every inquiry affect a credit score?

• Is there just one credit score?
• One of the most common myths about credit scores is that there is only one credit score. Web sites or financial advisors who claim there is only one “real” credit score are either misinformed or are being misleading. In fact, there are many different credit scores used by lenders – some estimate more than 1,000 – although some scores are used more predominantly than others.

  While there are many credit scores on the market, VantageScore^SM is the first credit score developed jointly by Experian and the other national credit reporting companies, Trans Union and Equifax.
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• What is a credit score?
• A credit score is a number that summarizes the historical credit information on a credit report. The number reflects the likelihood of becoming delinquent on a loan or credit obligation in the future.
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• What is a VantageScore^SM?
• VantageScore is a credit score developed jointly by Experian, Equifax and TransUnion. This score uses the same formula across all three credit reporting agencies, resulting in a more accurate and consistent picture of your credit history. Learn more about VantageScore.
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• What information goes into calculating a credit score?
• Credit scores use information from three key areas of your credit report: account information (such as credit cards, auto loans, student loans and mortgages), public records (such as tax liens or bankruptcies), and inquiries (requests by lenders to view your credit). Information such as race, gender, where you live, and marital status are not used in credit scores.
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• Why don't I have a credit score?
• Credit scoring models cannot generate a score without enough credit information. If you have little or no credit history, you will probably not have a credit score available.
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• Who calculates credit scores?
• When a lender requests your score, it is calculated by the credit reporting agency. The credit score is one of many pieces of information the lender may use in evaluating your credit application.
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• How often do credit scores change?
• Your credit score changes as your credit report changes. Therefore, it can change often since new information is added to your credit report all the time.
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• What is the credit score range?
• There are many different credit scores with differing ranges. As a result, it is possible for two different scores to represent the same level of lending risk. When you request a credit score from Experian, you will receive not only a score, but also an explanation of what the number represents in terms how lenders will view your creditworthiness. If you have a good Experian credit score, you likely will have a good score with lenders, even if the number is different.
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• What is the score range for the VantageScore?
• One of the unique features of VantageScore is the scale it uses. Scores range from 501 to 990 in groupings that approximate the familiar academic scale, making it easier for you to understand your score.
  • A: 901-990 (Super Prime)
  • B: 801-900 (Prime Plus)
  • C: 701-800 (Prime)
  • D: 601-700 (Non-Prime)
  • F: 501-600 (High Risk)
  Keep in mind that there are many different credit scores in the market and the score range will vary by model.
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• What are score factors?
• Score factors or score factor codes are provided with a credit score to explain how items in your credit report influenced the score. These codes can help you understand which items had the greatest impact.
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• Will I be penalized for shopping around for the best interest rate?
• Too many inquiries may have a negative impact on your credit score. However, most recently developed credit scores recognize when a consumer is shopping for the best rates and either ignore multiple inquiries or count them as only one inquiry if they occur within a specific period of time. In such cases, shopping around will have little or no impact on a credit score.
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• Who … or what … decides if I get my loan?
• Banks, credit card companies, auto dealers, retail stores and other lenders decide if you get your loan. Most businesses that issue credit or loans use credit scores to quickly summarize a consumer's credit history, saving the need to manually review an applicant's credit report and providing a better, faster decision. Although many additional factors are used in determining whether or not you receive the credit you applied for – such as an applicant's income versus the size of the loan – a credit score is a leading indicator of one's basic credit worthiness. Credit reporting agencies do not make lending decisions.
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• Can I use a credit score as leverage for a lower interest rate when seeking a loan or line of credit?
• It is never a bad idea to work with issuers and lenders to reduce your interest rate. You definitely have more leverage if a credit score puts you in the low risk range. However, because there are many different credit scores, the model used to calculate the score you obtain, and the score itself, may be different than the one the lender uses in making its decision. For instance, you may get a generic credit risk score from Experian, but an auto lender might use its own custom scoring model with a different scale, so the numbers won't be the same but will likely represent a similar level of risk.
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• What is a good credit score?
• Because there are many different credit scoring systems with different scales, a "good" credit score depends on the scoring system used by your particular lender. However, you can get a very good idea of whether you have a "good" credit score by getting a credit score and report from Experian. If you have a "good" credit score from Experian, you likely will have a "good" credit score with your lender.
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• Do lenders and creditors look at all three credit reporting agency reports and credit scores calculated using information from each report before approving a credit or loan application?
• Not always. Most mortgage lenders will look at reports from all three credit reporting agencies and credit scores calculated using information from each; but other lenders may use reports and scores from two, or just one of the credit reporting agencies.
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• Do preapproved offers get considered as new credit and affect a credit score?
• No, only applications for credit initiated by the consumer will affect your score. Inquiries into your credit for account review purposes as well as preapproved offers of credit have no effect on credit scores.
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• Do finance companies have a negative impact on a credit score?
• The presence of a loan finance account can negatively affect your score because they often carry high interest rates (which may hamper your ability to repay), which many lenders view negatively. However, these accounts, when paid on time can also have a positive affect on your score (if the loan helps you to make your payments in a more timely fashion for example).
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• Does having too many credit cards affect a credit score?
• Having too many credit cards with either high balances or large amounts of credit available can negatively impact risk scores depending on the overall credit history.
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• If my spouse had bad credit before we were married, will that affect a credit score?
• If you hold a joint credit account, have co-signed a loan or have authorized use of another person's credit, these items could affect a score if they appear on your credit report. It's important that joint account holders or authorized users understand that their credit behavior does affect the other joint account holder or main account holder.

  A credit account held solely in the name of your spouse, child or any other family member cannot impact your credit score. However, in community property states, all debt acquired during a marriage is considered a joint debt, regardless if the account is joint or in the name of an individual spouse.
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• Does co-signing for a loan affect a credit score?
• Absolutely. By cosigning, you are accepting full responsibility for the debt if the other person does not pay as agreed. A cosigned account will appear on both your credit history and the other person's. All loans and credit card accounts that appear on your credit report will impact credit scores.
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• Do late payments affect a credit score?
• Paying bills on time is generally the single most important contributor to a good credit score. Being late on any bill, for any length of time, is a possible indication of future non-payment of debt and is almost always viewed negatively by lenders. Any late payments will remain on your credit report for up to seven years.
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• Does renting or leasing a home affect a credit score in any way?
• The presence of a real estate loan that has always been paid on time shows lenders that you have established a strong credit base, and reflects positively on your credit responsibility. The lack of a real estate loan on your credit report does not decrease your score; however, it generally means that your credit score is not as high as it could be.
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• Do inquiries affect a credit score?
• Inquiries placed on your credit report when you apply for new credit can impact your credit score. However, inquiries have a relatively small impact on your credit score. In a credit scoring model, there are stronger indicators of future payment performance, such as past payment history and use of credit. Inquiries are rarely, if ever, the only reason for poor credit scores. They only become significant if there are other issues already lowering your score, such as late payments or very high debt.
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• Does every inquiry affect a credit score?
• Anytime your credit report is pulled – including when you order a copy of your credit report directly from the credit reporting agency – an inquiry is added to your report. Only some of those inquiries appear to creditors and therefore impact your credit score. Inquiries that were made for credit cards or loans for which you applied will be shown to creditors and are counted in a credit score. Inquiries added when you request a copy of your credit report or when an employer checks your credit report do not appear to creditors. We are pulling your credit report on your behalf, so the inquiry on your credit report will not be shown to creditors and will not affect your credit score.

  When you request your credit report directly from Experian, it shows you ALL inquiries. This is done so you know who has been looking at your credit. Some inquiries on your report are accompanied by a description of why the report was pulled.
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