Understanding Your Credit Score

What you need to know

A credit score is a complex mathematical model that evaluates many types of information within a credit file. The credit score is then displayed as a number that reflects your credit risk level. Typically, a higher number indicates a lower credit risk. Your credit score is not physically stored in the credit file. Rather, it is generated at the time a lender requests your credit report and is then included as part of the report. This measure is used by a lender to help determine whether a person qualifies for a particular credit card, loan, or service.

Most credit scores estimate the risk a company incurs by lending a person money or providing them with a service. Specifically, the credit score reflects the likelihood that the person will make payments on time in the next two to three years. Keep in mind your credit score is a fluid number that changes daily as information is added or revised in your credit report. There are many different credit scores used in the financial service industry. Your score may be different from lender to lender (or from car loan to mortgage loan); depending on the type of credit scoring model that was used.